Advice needed for a friend please!

StuB001_2

A friend of mine has found herself in a rather tricky financial situation - she has run up credit card debts of around £27,000 through a combination of naivety and a fear of dealing with her financial issues. She has kept being offered new credit cards when maxed out on others. Sure she has to carry some responsibility for her spending but surely this is also irresponsible on the part of the lenders.... Her minimum payments now exceed £1000 each month & with her net salary from employment being around £1300 each month she has hit major problems. She has sought the advices of the National Debt Line & they have advised her to enter into a debt management plan but she is reluctant as this will involve a poor credit file for around 10 years, and at the age of 26 a mortgage in 3 - 5 years is a realistic aspiration. She has been looking around for a loan to consolidate her debt and pay off over 4 years. Unfortunately prime lenders will not touch her so she is left with her bank who want to offer her 17/18% APR (She also has a £3000 overdraft with her bank). Is this right or fair? Feels like an institution making money out of someone's desperation....To top it all she wrote to all credit cards to ask if they would stop chargin interest whilst she sought advice about her finances - Virgin (yeah right, as if you are!) wrote back and increased her interest rate to 24.9%!!!!! How are people meant to get ahead in such circumstances? She is a graduate with a reasonably good job and very good prospects but her work and health are now suffering due to her money worries. She's getting to the point when she will no longer be solvent. What can be done to combat this profiteering and sort her situation?

ms_london

There is no way that her creditors should have INCREASED her interest rate - never heard of that one before. That is wrong!!

It sounds as though your friend is on an ok wage. I would definately recommend that she steers clear of the National Debt Line & the consolidation loan - especially if she'll be paying that much interest.

Could you send your friend here? What she could do with doing is preparing a SOA - listing EXACTLY what she pays out each month, what comes in each month, every penny she owes & to whom/the balance/APR/montly repayment. She needs to sit down & work out a budget - of what she can comfortably repay to her debt each month & what she has to live off for the rest of the month.

When I couldnt get any more credit and was forced into my "lightbulb" moment, I couldnt get 0% cards or a consolidation loan either, so I had no choice but to pay it off as the debt stood. One of my creditors stopped my interest (Sainsbury's I think), but although the others didnt, they were quite good in agreeing a repayment plan that suited me...

xx

StuB001_2

Hi, thanks for your response - it is re-assuring to know that others have been there & back. How long did it take you to rid the debt?

We've started on a SOA & she can afford £650 per month....

ms_london

StuB001 wrote:

Hi, thanks for your response - it is re-assuring to know that others have been there & back. How long did it take you to rid the debt?

We've started on a SOA & she can afford £650 per month....

I think that the minority of people ARENT in debt myself - so your girlfriend is definately not alone!!

£650 is a good chunk of money - you need to make the highest payment on the debt with the highest debt & the minimum payments on the others. If you post a list of debts we could probably advise...

Does this leave her enough to "live on" each month? Is EVERYTHING included in the budget? Sometimes its easy to overlook things...

I swear my answer changes everytime, but its hard to know EXACTLY how long it took me to become debt free. I had my "lightbulb moment" at the end of 2002, but it took a while just to get used to paying the minimum repayments, during 2004 I paid off around £5,000 & cleared my 3 credit cards, and last year I cleared my loan of £10,000 - so between end 2002 and end 2003 I suppose I cleared the rest - but it took me AGES to get straight!!

I dont think people should be so hard on theirselves, when you think how long you run the debt over & for how many months you were living above your means, you cant just learn a new habit overnight, so it will take a while to get used to spending within your means...

I've gone the opposite way now and cant understand how people CANT save - oooops!! The lectures I give my housemates... :rotfl: :rotfl: (they love me really!!).

Another thing I would suggest is to set up Direct Debit's or Standing Orders for the debts, preferably all just after payday - that way they are paid on time, and your girlf will know where she stands financially after theyve left her account - nothing worse than DD's coming out throughout the month!!


EDIT - I meant friend not girlfriend, sorry!! :0)
xx

StuB001_2

Here goes....

Card Min. paymnt. Debt

Barclaycard £168.00 £4,291.61
Capital One £83.27 £1,392.96
Lloyds TSB £152.00 £3,794.23
Marks & Spencer £118.38 £3,946.11
Monument £196.00 £3,236.55
Virgin £102.40 £7,954.69
Egg £53.54 £2,677.20

Overdraft £3k

Emmzi

Stu,

do you have APRs?

Emmzi

kar

Ok, I hate to say it, but if your friend can't afford the minimum payments on all the cards it will affect her credit rating. I'm sure she's prob aware of this but as she's thinking of a mortgage in a few years she needs to be made aware if she's not already.

Has she tried a lender that she is not in debt to at the moment for a consolidation loan (I wouldn't ask for the full amount just say 1/2 or 1/3). Basically she needs to somehow bring down the min payments so if she consolidated some of the CC's onto a lower monthly payment she may be able to meet all the min payments and hence protect her credit rating from getting any worse.

If she asks for a smaller amount then maybe she will be more likely to be accepted. 10K say rather than 27K.

If that's possible she could post a full SOA on here and thens tart snowballing the remaining CC's.

StuB001_2

Hi

Yes... from copy statements....

M&S 15.9% p.a.
Virgin 24.9% p.a.
Capital One 0.998% p.m.
Lloyds TSB 1.492% pm
Monument 1.833% pm
Barclaycard 21.9% pa
Egg 1.24% pm

Think that's it....some of her cards have a mix of interest, i.e. one for purchases & one for balance transfers.

Thanks.

StuB001_2

She's just tried for full amount so far - so worth a punt for smaller amount. Thanks.

lazy&indebt

Unfortunately, that's how these companies make their money - by making it SO easy for people to get credit. You learn afterwards that while it is so easy to obtain credit and it's easy to spend it - it is a lot harder to pay it back but it is doable has your friend done a spending diary and worked out if there are any areas in which she can save money? For instance, I worked out I was spending around £10 per week on take aways, i cut that straight out and that's £40 per month saved already! Also thinking of things to do in your spare time that don't cost anything. me and my boyfriend like to walk along the canal in the summer and feed the ducks - it costs nothing but is very enjoyable!

lynzpower

Can your freind actaully come on here and speak for herself, it makes it easier for us