Girlfriend in too much debt....

arambol

Hi guys,

I'm writing on behalf of my girlfriend who needs to restructure her borrowings and I'm hoping, with your help, to advise her best I can.

I was thinking along the lines of a consolidation loan but having read some of the posts on here they may not be the best way forward.

She is 31, employed and living in London.

Her debts are as follows;

Nat West Loan - £25,000 over 7 years (taken out in Oct 2008) @ 8.12% - £391.66 per month

RBS credit card - £5301 @ 15.75%

Nat West credit card - £4597.12 @ 15.75%

Virgin credit card - £6715.467 @ 16.6%

She has run up the credit card debts and maxed them out, as before finding permanent employment she was unemployed for 6 months due to illness. She was freelance at the time so didn't get paid.

She is also committed to a 2 year lease on a rented flat which has a year to run (expires in Nov 2010). I have helped as best I can but I am setting up a business and money for me is extremely tight.

However as of last week she is now in a pretty strong position with a salary of just under £3000 per month after tax but until she can build up some capital the debts and interest need some attention.

What I would like is to present her with the best option for reducing her loan / cc payments each month. She can't reduce her rent but she can get rid of the car which will help. However I haven't allocated any outgoings for entertainment so there needs to be more cuts than just the car as I'm sure she'd appreciate having some form of social life.

So what are the options? Consolidation loan, IVA?? Maybe lower payments at the expense of longer term debts may suit her more in this case? All opinion welcomed.

Really appreciate your help.

Thanks
Arambol



S.O.A of my lovely but hopeless with money, girlfriend:


Salary - £2996.88


Monthly Outgoings:

Mortgage/Rent - £1343
Council Tax - £136
Gas - £42
Electric - £20
TV License - £11.95
Phone (landline) - £20 - (needed for internet)
Mobile - £46.87
Internet - £7.34
Sky - £0 cancelled
Food - £350
Car repayment - £172.50 @11% 3 years
Car Insurance - £22
House Insurance - £11 (contents only)
Petrol - £30
Travel Card - £46
Life Insurance £5.16
Pet Insurance - £0 cancelled
Cat Food x 2 - £30
Gym - £80 (8 months to run - tried but can't cancel)
Haircut / Colour - £50
Entertainment - £0


NatWest CC - £105
Virgin CC - £90
RBS CC - £120
NatWest Loan £391.66

TOTAL = £3129.98

arambol

Ahhh, just looked at IVA.... probably not an option.

davetrousers

I'm not an expert but youi might want to consider a DMP with cccs

But also try and cut down:
Mobile phone - Can she move to a tariff more in keeping with usage (or cut down use).
Food costs
Cancel the gym as soon as you can (in 8 months time)

Try and pay more off each month of the higher % Credit Cards.

euronorris

350 pm on food for one person is a LOT of money. This should be around 100 pm, or less with meal planning.

The OS board has lots of ideas on how to cut your grocery bill.

Also, the mobile cost can be reduced. Can she switch to pay as you go? If she can't cancel the contract yet, ask them if she can drop a tarriff in order to reduce the cost.

50 pm on hair is a lot also. 30 GBP every other month should be enough. She can always do the colour at home herself for much cheaper.

I can't see anything included for the car tax, which should also be taken into account. Remember, every expense that isn't monthly, should still be accounted for and saved for so she doesn't need to use a CC in the future for such events.

I'm sure others will have some tips too.

Burlesque_Babe

ok - some pointers....

rent - £1300+ per month is _pale_ can she rent out a room?
food - £350 - how many is this for? Budget approx £100 for 1 for the month
mobile- £46 - again, very high. If she out of contract, swap to PAYG, if in contract ask to go to lowest tariff.
cat food - £30 - this seems very high. What does she feed them each day?
hair cut- £50. Every month.....ouch.....this can go to ever 2 months, colour at home and/or have it cut at the local hairdressing training centre (I work at one - they are excellent and are supervised - better than many I've paid an arm and a leg for!)

Try to move some - or all - of the credit card onto 0%.

Lots of ways to cut a huge chunk from the budget here - consolidation is not the answer and with such a large salary now coming in, I think she could really make great inroads to clearing the debt as long as she can knuckle down.

With regards to entertainment - unfortunately it is something which has to go whilst paying off debt. Lots of things that are free though

I hope you can help her before it gets any higher - you sound lovely to be so considerate.

Hippychick

You're right a cosnolidation loan won't work, she needs to pay down the debt and work through it, that way she'll learn and change her ways.

Why does dhe have a car and a travel card? if she got rid of the car that would free up almost £200 per month.

Is she able to sublet a room at all? that could help with the rent.

Food is very high for a single person, she can easily knock that down to £200 or so.

£30 to feed 2 cats is also very expensive, I have 2 cats as well and probably spend £10 a month on cat food at most.

You are doing the right thing by helping her, have a look at https://www.whatsthecost.com and input her debts together with details of repayment. It will give her a debt free date and will show you what to focus on.

She needs tolook at clearing virgin first as it has the highest apr.

Good luck!

arambol

Thanks guys,

Yes car can go. Tax was paid by the dealer so not due yet.

Travel card is necessary.

It's a 1 bed flat so no room for a lodger.

Stuck with 02 (iPhone) for another 8 months but i'll look into switching to lesser tariff although she received the phone free with the current tariff so not sure how willing o2 will be.

Food is too much, agreed. She's a terrible cook (remind me why I'm with her again? ;-), and works long hours so usually lives off convenience, pre prepared food. I'm a bit of a foodie, so I'll start taking her food shopping at the weekend and help plan her meals.

Hair.... gulp, wish me luck with that one :-)

Cats eat Iams dried food and Whiskas (pouch each per day). ... any suggestions?

I'm also applying for her credit report to see if she can switch to a couple of 0% cards, especially the Virgin card as suggested.

Is consolidation the same as a DMP with CCCS?

Thanks again everyone for the suggestions so far.

Charco_2

No consolidation is NOT the same as DMP (that's been confused A LOT on here recently)

arambol

Is it not?

I'm reading up on the options available using the search function and google and so far it seems to me that a DMP is "consolidating" all your debts with someone like CCCS. They negotiate improved interest rates and you basically pay less but over a longer period of time.

To me that seems like consolidation but there is obviously a technical difference. Care to elaborate?

arambol

Is it because your debts haven't actually been moved into one place. They are still separate and with the original creditors. It's just you make a 'single' payment through CCCS.... although CCCS don't own the debt.

is that about right?

Oldernotwiser

arambol wrote: »

Is it not?

I'm reading up on the options available using the search function and google and so far it seems to me that a DMP is "consolidating" all your debts with someone like CCCS. They negotiate improved interest rates and you basically pay less but over a longer period of time.

To me that seems like consolidation but there is obviously a technical difference. Care to elaborate?

Consolidation normally refers to taking out one large loan to pay off all the others - the sort of thing that's advertised on daytime TV.