Girlfriend in too much debt....

onlypaddy

arambol wrote: »

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 MY GOD!! for a one bedroom flat??? there must be some way to reduce this. has she talked to her landlord? Is there the possibility of moving out and securing a replacement tenant so the landlord isn't losing out?
Council Tax - £136
Gas - £42
Electric - £20
TV License - £11.95
Phone (landline) - £20 - (needed for internet)
Mobile - £46.87 Seems a little high, are all services necessary?
Internet - £7.34
Sky - £0 cancelled
Food - £350 Is this for just her or for the two of you? If its just her, its quite high
Car repayment - £172.50 @11% 3 years Good idea to sell and repay this and downsize. Is there any point in owning a car in London?
Car Insurance - £22 And this goes too if you sell
House Insurance - £11 (contents only)
Petrol - £30 See above
Travel Card - £46 See comment about selling the car - any point in having the car if still having to pay for extra travel on top?
Life Insurance £5.16
Pet Insurance - £0 cancelled
Cat Food x 2 - £30 Expensive - could be halved. EDIT - is it the Whiskas expensive stuff or bog standard in jelly stuff? Also, Iams can be replaced by cat biscuits maybe?
Gym - £80 (8 months to run - tried but can't cancel) what are the penalties for cancelling? Less than 80 x 8 = £640?? Probably....
Haircut / Colour - £50 Necessary? Haircut yes....my fiance gets hers done for about £15
Entertainment - £0


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

TOTAL = £3129.98

I've tried to provide some possible savings based on your SOA above. there is a more detailed SOA you can do...need to find the link....

The major major issue for me would be the rent. Encourage her to talk to her landlord and try to work something out, even if it does mean moving out as suggested. Maybe even challenge the landlord to prove if this level of charge is fair for a flat this size?

savingcaz

arambol wrote: »

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) - Is it worth going back with sky you can get basic sky package, internet, tv and phone landline etc etc - £31
Mobile - £46.87 - seriously high for a mobil i pay £15 a month for 350 mins, and unlimited texts - she needs to look at this!
Internet - £7.34
Sky - £0 cancelled
Food - £350 - is this for one person? we are currently living on £150 a month for 2 adults and a baby!
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 - again, anyway this can be reduced, our cats now have costco biscuits as advised by vet! and steamed fish or chicken - working out about £10 a month maybe less!
Gym - £80 (8 months to run - tried but can't cancel) - is there a lower package she can go on?
Haircut / Colour - £50 - Not being funny but thats a luxury she can't afford, £50 a month works out at £600 a year on hair cut & colour, is it worth having an all over colour if need be then using home colours? or even going to a local beauty college normally a lot cheaper there.
Entertainment - £0


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

TOTAL = £3129.98

Hope you don't think i'm being harsh, we too have had to really cut down but it is worth it to get out of debt! good luck hope your girlfriend gets sorted soon!

BeautyandtheBeast_3

Cats will be much happier with tin of tuna (cats love fish naturally!) get cheap value tins!

Rent is ridiculous for a 1 bed flat! food is very high for 1 person!
good luck with her!!

Charco_2

The fact that it provides you with "one single affordable monthly payment" is the only similarity. There are big pros and cons to both!

A consolidation loan is a loan you take from a bank to pay off all your other smaller debts. You're then left with one debt that you pay every month at the same time. Sounds great!
So for arguments sake, your girlf has debts of £25,000. She takes out a loan of £25k over 7 years to pay this off, leaving her with one payment of £408.31p (at a rate of 9.9%) paying off £34,200 or so. You haven't annoyed any creditors, there are no defaults against her credit rating (unless there already are some), no creditors are ringing everyday to pester you for money (because you've only got one creditor and he's being paid regular as clock work!)
There are huge pitfalls here though. It requires discipline, will power and a bit of luck!

A DMP is an INFORMAL Arrangement whereby you pay a company an affordable monthly amount and they deal with all your creditors on your behalf. They also arrange for interest and charges on your accounts to be halted. However it's an informal arrangement - you're not bound to it and neither are your creditors... every so often they'll bypass your company of choice and harrass you directly until you point them back in the right direction. Also, they MIGHT not be able to get your creditors to halt charges and interest so your debts will continue to rise.

I like neither of these solutions and could waffle on for days about them. DMPs are, to my mind, a short-term solution at best and the numbers of times i've spoken to people who "consolidated their debts" only to end up in twice as bad a situation is ridiculous!

Gottodothis

Sorry no real advice other than:



Iam's is a complete food so cat doesn't need the pouches too?

Mmmmm £50 a month on hair??? :eek:

Oh and food i feed 5 of us plus several pets for £200 a month and we eat really well

Good Luck

digitalphase

Just some of my thoughts, apologies if they have already been said, not read through all posts yet

arambol wrote: »

Hi guys,

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% This one should be paid off first, but there's not a huge amount of difference between the APR's on her cards, so if she can afford an extra £10 or £20 each month towards each it would help her.

Salary - £2996.88

Monthly Outgoings:

Mortgage/Rent - £1343 Very high, but as you say she's tied down to being there for another year. She would need to move a.s.a.p when she can though as this is scarily high. I thought the £25k loan was for a deposit for a mortgage, but obviously not.
Council Tax - £136
Gas - £42 This is a lot for one person per month who is out at work all day...
Electric - £20
TV License - £11.95
Phone (landline) - £20 - (needed for internet)
Mobile - £46.87 Incredibly high, if she's out of contract get her to switch to pay as you go, or if she's with 02 they do an excellent 30 day contract for £15 or less a month with loads of text/minutes included.
Internet - £7.34
Sky - £0 cancelled
Food - £350 Again, very high. We pay around this for 2 adults including lunches, though we're trying to get it down. She needs to seriously address this, as excess money can go towards debts
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 There is no need to be paying this much to feed 2 cats! I have two myself, and they have a large bag of Whiskas or Go Cat which lasts about 2-3 weeks and that's a fiver a bag!
Gym - £80 (8 months to run - tried but can't cancel) OUCH! Make sure she gets maximum usage if she cannot get out of this!
Haircut / Colour - £50 Halve this, try and get hair done every other month. That's what I have to do :rolleyes:
Entertainment - £0 I'm sure something should go here


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

TOTAL = £3129.98

Can she sell her car as she lives in London? Does she really need it? That way she'd save around £250 a month which can really smack into her debts.

arambol

Rent is about the going rate unfortunately. I know, I've looked. She lives in a nice part but the flat is pretty small.

The landlord or estate agent are unlikely to budge off this as rents are strong and properties in demand at the moment although potentially there maybe be a way of getting a replacement tenant.

Mobile is just a flat rate. Non negotiable although she can get out of it in 8 months time.

Vet put one of the cats on Iams because of stomach issue (bleeding) but we could try the costco or some others and see how the little blighter does. Whiskas is the jelly pouches. Tins would be cheaper no doubt. They love tuna but I would have thought more expensive?

GREAT ideas about the gym (both paying off in full early and cheaper package). I will call them and ask.

Food needs working on but I can help her with that.

Be as harsh and critical as you like. All very useful and welcome comments.

Little_Vics

I would say it's certainly possible for her to reduce her debt without another loan. There's a link somewhere to makesenseofcards which has a 'snowball' thingy on it - stick some numbers in and have a play around. It's working for us...

BeautyandtheBeast_3

arambol wrote: »

Rent is about the going rate unfortunately. I know, I've looked. She lives in a nice part but the flat is pretty small.

The landlord or estate agent are unlikely to budge off this as rents are strong and properties in demand at the moment although potentially there maybe be a way of getting a replacement tenant.

Mobile is just a flat rate. Non negotiable although she can get out of it in 8 months time.

Vet put one of the cats on Iams because of stomach issue (bleeding) but we could try the costco or some others and see how the little blighter does. Whiskas is the jelly pouches. Tins would be cheaper no doubt. They love tuna but I would have thought more expensive?

GREAT ideas about the gym (both paying off in full early and cheaper package). I will call them and ask.

Food needs working on but I can help her with that.

Be as harsh and critical as you like. All very useful and welcome comments.

vets - dont get me started!!
Tuna - 55p per tin from Co-op. (value but still good enough for a cat)

MrsTinks

Please don't feed cats tins of tuna - especially not value - they're all brine and if you want to feed cats tona you need the springwater variety... and it's not exactly a balance diet - mine actually get a tin of Tesco's macrel in tomato which for some reason the love more than anything else you can buy them - they get maybe one a month.
Ideally if you could put her SOA into this format it would really make it a lot easier: http://www.makesenseofcards.com/soacalc.html
Cat food - I buy mine online from vetuk - order in bulk and you get free delivery. Best brands are Burns, James Welbeloved and Arden Grange - better quality that Iams and will work out cheaper too... Tell her the cats can have 1 pouch as a treat a week - NOT per day!
Rent - you need to check that contract! 2 year tenancy? 1 bed flat? We live in a very expensive area here and a 3 bed mid terrace is over £200k - mortgage works out at a LOT less than her flat rent...
Get hold of the contract and look for a get out clause!
Food - £350... really???? :eek:
Tell her tesco value noodles for lunch never killed anyone! and at 9p per pack they're blooming good value and no cooking skills required! Get her a student cook book too - easy to follow recipies And introduce her to batch cooking.

Unless her outgoings can be less than her income she's going to be facing a DMP and that means her creditors could start CCJ procedings if they felt so inclined - that should be sufficient to wake her up from her pink fluffy cloud that she seems to be living on...