How do I cut repayments in the short-term?

mjpmjp

This goes totally against all Martin's best advice but my fiancee and I need to move short-ish term debt to a longer period and I'm hoping someone can suggest the best course of action.
Two recent promotions and decent payrises mean we collectively earn £60k but a legacy of naff wages (and bad budgeting) means we have around £19k debt in personal loans and credit cards. The loan terms range from nine months to four years and the credit cards are on interest free periods for the next five months.
Our total mortgage is £103k and our house is estimated to be worth £140k.
The reason for looking to shift the various loans/cards is that we currently shell out over £1,500 a month in repayments. We're getting married in September and have a £3k shortfall on the wedding budget despite efforts to curb costs (suppliers seem to double prices when you mention the 'w' word!).
It may sound mad considering the debt but I also want to start a business early next year and as my fiancee's 34 we also are running out of time to start a family.
The business I'm looking to start has the potential to double my salary so it's worth doing I don't want the pressure of such hefty repayments for the first year.
I approached my mortgage company to extend our mortgage with the intention of repaying the additional borrowing as and when the business takes off. However, the lender won't allow extensions including debt consolidation if over 80% LTV.
My current mortgage is a two-year discount (2.1% off SRV with Darlington Building Society), all the loans are competitive (Northern Rock/cahoot) and as mentioned before the cards are on 'tart' rates.
If anyone can suggest a solution that will cut the amount we spend on repayments at the moment without tying us in to ridiculously long redemption penalty periods I'd be really grateful.

peterg1965

Tough one, and the easy route is to get a consolidation loan over a longer period. I would suggest that with your level of combined salary, relatively low salary to mortgage ratio that you would be better off making cutbacks in expenditure to pay off your outstanding short term debt. It would be interesting to see your SOA to see where the money is going, your mortgage can be no more than £500/month and your combined income must be close to £3500. Maybe you could flex money between cards, go for LoB cards and reduce monthly expenditure on short term borrowings.

Weddings are particularly emotive, but if I had my time again I would have gone and got married on a beach in the Maldives and had a party when I got home!!! The money we would have saved..........................

lynzpower

Agree with you completely there about weddings! Some of the prices people reckon on charging. Id rather have netto sponge cakes all round than shell out £350 on a wedding cake!

Seriously though, without a SOA its not easy to tell you how to cut back, but 60k is a lot of income, and Id reckon at the very least, you could cut back part of it and worst case scenario get a loan for the rest. I wonder at your comment "previous bad budgeting " is it definatley all in the past, or is there any present difficulties?

Lots of luck
Lynz
x

southernscouser

Hey mjp!

Don't take this the wrong way but I think you are mad for wanting to take your debts over longer terms! :eek:

You have a big income compared to your mortgage so there must be extra money somewhere!

You really need to post a full SOA (state of affairs) for us to see what position you are in.

Have a look at this thread for guide. Only then will we be able to give you the best possible advice!

Bloke_with_a_simple_life

MMM... I agree SouthernScouser

By shifting short term debt to long term debt doesn't seem like the solution to your problems. It just delays them to the medium to long term.

And, with all things going well, in the medium term, you will have kids to support.. maybe need a bigger house? MOre expenditure... perhaps a period of less income whislt paternity/maternity leave is taken.. & more trouble tryng to repay debts incurred years in the past.

It's not just planning a family that's important- but properly planning your finances too.

SouthernScouser is spot on - you have to look at what you are spending your money on - and economise. THis includes wedding expenditure.

I would recommend Putting up you and your other half's joint SOA, and get some good advice from people on here.

Good luck!

CLAPTON

you collectively earn £60K and you are losing the certainty of this to go start a business and probably will lose one income to have a child.
ok so rather go mad and repay all the debt you possibly can now while you have this income, you are looking for ways to defer it until you have only one income and that may or may not be erratic?

are you serious? as the man used to say.

without a SoA its difficlut to say, but cut all expenditure to the bone and pay off your 19K asap.... before you have a child and before you start your business
say 1 to 2 years ... any reason why not?

tyllwyd

I completely agree with Clapton. Why on earth would you even think about starting a new business with £19k+ of debt hanging over your head? If anything is going to drag your business under, this will. (And do you need to raise any capital even to get started? With this debt you might find it is much more difficult.) If you watched Dragon's Den, if any of the budding entrepreneurs said they wanted to take a salary out of their new businesses, that was the kiss of death as far as the dragons were concerned.

And planning a wedding that you know will cost more 3K more than you can afford. So how much are you spending on it?? If you are serious about starting a business, you have to be planning for it, so I can't understand why you would be even thinking of a lavish wedding the year before.

If you and your fiancee have a combined salary of 60K, and you seriously want to start a business and think about a child within the next few years, in my opinion you have to start cutting back now, and throw everything into debt repayment followed by savings. Are you saying that at the moment, as a couple with good incomes and no children, you can't save enough to pay off that £19K this year? If not, I think you would have to be crazy to even think about giving up your job, because I don't think you will have proved your commitment to making the sacrifices that you would have to make to get a new business off the ground.

mjpmjp

Guys,

Many thanks for all your comments (even if some stung a little).

Right, SOA on the way but first a quick explanation about the situation:
The reason for the high debt is that both my fiancee and I have in the past few years lived life to the full, travelled the world, bought nice furniture, got drunk at the best bars etc.
We were both journalists, I'm now in the wicked world of PR, and consequently started life on really naff wages (I started in journalism on £5k when we started despite having a degree when all my mates were earning three times+ that. We've both had to do second and third jobs in past lives to survive which explains the reason for being more frivolous of late)
I left journalism for more money and in the past two years our income has gone from circa £40k to £60k
It probably sounds like we are rolling in cash but considering less than a decade ago we were earning £12k collectively when friends were earning that in three months we've gone through hard times but have worked hard to make our wages better.

However,
We were both anti-kids until recently and so were living for the now.
Then a year ago we decided to have kids, therefore decided on marriage etc

So, we are getting married in Sept as mentioned in the previous thread. Despite tyllwyd suggesting 3k over budget for the wedding is ridiculous (ever got married? Ever had a wife-to-be who didn't understand that budget meant 'outer limit', not 'nice if you get near'?) our total wedding incl honeymoon is £11k which in this day and age is not extravagant (I have three friends getting married this year, their weddings are costing between £15k to £20k).

I left journalism with the intention of starting a media consultancy but decided to make my mistakes on someone else's time rather than on my own business.

However, as mentioned previously, my future wife is 34, we'd like two kids and there is no guarantee that she will fall pregnant at all so we will be trying for a family from September. That's the reason why I'm looking to start a business sooner rather than later (hopefully next March).

The logic (if there is one) is that it will be easier to start a business before the kids come than after (bearing in mind lack of sleep, pressure of covering for a lack of my wife's wage, putting clothes on the baby etc). My desire is to earn enough that my fiancee can make her own mind up whether or not to return to full-time work rather than being forced to because we don't have enough to live on.

Apologies for the essay on this one but I wanted to explain that there is slightly more thought to this than just a pie in the sky, fanciful idea to start a business despite being up to my eyeballs in debt! (you may still think that's the case)

So, SOA time:
I currently earn £32,800, up from £30k in Jan. I have a company car so my breakdown is as follows:
Monthly wage after tax: £1,830 (tax code hammered by car)
Personal loan is with Northern Rock - 4yr loan due to expire this December - £300/mth
Credit card is with Natwest - 0% until June - £5,600 - paying £130/mth
No overdraft on current account
Our mortgage is a 2.1% discount from SRV from Darlington Building Society - 2yr deal - deal ends May 2007. Paying £611 at moment
I have to drive to work approx £200/mth in fuel (private and biz)
I pay £200 into wedding pot at mo
I've just cleared my student loan (wahey!) but was paying £60/mth to that.
I put £500/mth in to a house account for mortgage and bills but I think that's probably about £30/mth shy of what needs to go in.


My other half is as follows:
She's just had a pay rise this month and has gone from £23k to £28,200. So her monthly take home after tax (incl expenses that come each month) is £1,750
Loan with Northern Rock £8,500 - paying £196/mth, due to pay off in Jan 08
Loan with Abbey - £140/mth due to pay off around the same time
£1750 on Amazon (Halifax) credit card on interest free until May
She pays £360/mth to the wedding fund

Since signing up for MSE I've been more careful about who we go with for mortgage, bills etc. Here are our monthly outgoings:

Mortgage £611.90
Council tax £74
Insurance (home/contents) £25
TV licence £10.99
Water £23.04
Phone/TV/Broadband (incl calls) £80 - we used to have all channels but have slashed it to freeview ones, still have broadband (essential) and phone
Utilities £80

We get organic veg and fruit boxes £18/wk = £78/mth
We only buy occasional things from supermarkets and work lunches but approx £200/mth
We also have a cleaner (no prizes for guessing we slash this expenditure!) but she's a bargain at £11/wk = £48/mth

Some of the above will go up as of April (we've had notice that water, council tax, TV licence etc will go up slightly)

We have been gradually modernising our house for the last two years. We have £1k in the joint account but estimate remaining home improvements to be as follows:
£400 electrics
£400 dining room
£1000 carpets
£2000 rear yard (concrete deathtrap at mo)

Our parents live abroad so we are pretty much forced to spend £500/year on flights to see them.

Our spending has been drastically scaled back since being betrothed and we rarely go our for meals/socialising.

Hopefully this builds up more of a picture. Feel free to ask more questions if there is anything you feel we have forgotten.

southernscouser

Wow beast of a reply fella!

OK the first thing that hits me is that all your credit cards are on 0% which is excellent! Consolidating them to then be charged is suicidal! Look at it from a business point of view! Just doesn't make sense does it!

Your SOA is a bit all over the place to be honest! :rotfl:

Do you have a joint account or do you pay for things seperately?

Best thing to do is total up your income and outgoings as one! I would have a go but it's late!

See this thread for a template!

skintchick

Hi! I have a few thoughts on your SOA:

Insurance (home/contents) £25
This seems high - I paid £120 with CIS. Can you shop around?

Water £23.04
From what you say about this goin up, it seems to be rates rather than a meter. I'd advise you to get a meter fitted as my bill has gone from £27 rates to £19 on a meter, plus you're in control of it.

Phone/TV/Broadband (incl calls) £80 - we used to have all channels but have slashed it to freeview ones, still have broadband (essential) and phone
Ouch! This is very high and I'm usre you could get a cheaper package.

Utilities £80
If this is just for gas and leccy it is also VERY high. I pay £35 for both together. Switch suppliers and get a cheaper deal.

We get organic veg and fruit boxes £18/wk = £78/mth
We only buy occasional things from supermarkets and work lunches but approx £200/mth
You spend how much on food??? Two people can eat well on around £120 a month so you are spending over double what you need to. This can be slashed.


We also have a cleaner (no prizes for guessing we slash this expenditure!) but she's a bargain at £11/wk = £48/m
She may be a bargain, but there's two of you and you are both capable of cleaning. Get rid of her.


We have been gradually modernising our house for the last two years. We have £1k in the joint account but estimate remaining home improvements to be as follows:
£400 electrics
£400 dining room
£1000 carpets
£2000 rear yard (concrete deathtrap at mo)

This section bothers me because it seems you are still in the trap of wanting things. I have got threadbare carpets but as i cannot afford to replace them, I just put rugs down. I think you need to calm down a bit and live with what you have until your debts are cleared.

Our parents live abroad so we are pretty much forced to spend £500/year on flights to see them.
No you're not. Tell them you can;t afford it and can they come to you.

I think on the wages you;re on this should be asy, but you just don;t seem to have had your lightbulb moment yet.

Hope that helps anyway

mjpmjp

Sorry for flying all over the place. Will pull it together and re-post.