What would you do?

Calypso

Hello

I would really appreciate some advice on the following situation:

We currently have around 10k's worth of debt. This is broken down as follows:

Lloyds Bank overdrafts £-2875.01
Alliance & Leicester overdraft £-240.21 (on 0% until May 07)
Egg Credit Card £5394.94 (currently on 0% due to finish June 06)
Virgin Loan £1521.33 (APR 7.9% finishes next year)

I have spent the day on the phone and reading this site trying to work out the best way to manage these debts as I have two main concerns.

1. We are in the process of switching to A&L as I wanted to take advantage of their 0% overdraft facility. However they won't match my current Lloyds limit of £3300 and will only give me a limit of £1200. When Lloyds close our accounts next month they will want repayment of their overdraft.

2. The Egg card rate is due to finish in due so I need to do something with that balance also.

My worry is that for some reason we have started to be refused credit on recent applications for other credit cards so shifting balances to other cards is not seeming to be an option for us anymore. I have obtained a copy of our credit rating and there isn't anything particularly wrong with it, so I can't see a specific reason why we should be refused.

I made a call to the CCCS today and have a telephone appointment with them in a couple of weeks to go through things, however, I am concerned that this will affect our credit score further and having read some of the threads on this site today it would seem that people haved mixed views on them.

As far as income goes, I am currently on maternity leave until September, but with SMP, my husband and I have a combined monthly income (including child benefit & tax credit) of around £2k per month. Our bills total £950 per month and I believe we are on the best deals for everything. That leaves around £1k per month for debt repayments, food, petrol etc.

So I really don't know which avenue to go down next, whether we consolidate everything into a personal loan (subject to acceptance) or as we have a relatively small mortgage whether we increase the borrowing onto that. I know that this is normally inadvisable but I would rather that than risk our credit score for a number of years.

I would really like to know how other dfw's would deal with this debt and what action they would take.

Calypso
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QueenB.

Welcome to MSE, i know you say you have the best deals for everything but i am sure most people would still say post a SOA because you never know. Plus it will give some idea of what min payments you have and how much you have to throw at your debt.

Then people will be able to give some practical advice.

Personally, without being aware of all the other details i would not see a need for a loan, or increased borrowing, i would just cut back and up debt repayments.

Ali-OK

Hi and Welcome! :wave: Congrats on baby too!

Have you thought about keeping your Lloyds account open, as well as having the A&L one? This would solve the worry of where to put your overdraft debt.

I'd recommend you post your SOA (statement of affairs - incoming/outgoings) all broken down, as we may be able to help on some savings. There's a sticky by SouthernScouser for first time posters that will help you do this.

Your A&L credit check would show up on your report, including the overdraft limit and balance, so if that was recent, they may have impacted getting further credit, plus if you've continued to apply for a few others and been refused, you need to wait a good few months to re-apply now I'd suggest.

A £2K income with £10K debts should be quite manageable, I certainly wouldn't think about consolidating into a loan.

Pop your SOA up - I think the answers will be in there.

As an aside, I'd contact Egg and ask if they've got a LOB (Life of Balance) deal you could take up with the debt on there once the 0% ends. If you don't ask, you don't know!

Calypso

Thanks for that - I will post a full SOA in due course to give a better picture (when I'm not feeding my 2 week old!)

I am worried about Lloyds deaminding back the overdraft money as we haven't got that money to hand. But I agree with you cutting back (not one of my strengths I have to admit) and increasing debt repayments. When I do have some time I want to re-do our Budget so I can see where I can cut back further.

beanielou

Hi Calypso
Hello & welcome to MSE

Calypso

I would happily keep the Lloyds account open, however, I think they want £1000 paid in every month. I guess our salaries could go into the A&L account and I could have standing order for the remaining money less bills money to go into our Lloyds account which should satisfy that. I able to reduce the Lloyds overdraft using the limit given by A&L and some other money I am owed. I guess I could then work at reducing the Lloyds overdraft first.

Apologies if I am not posting replies properly, I haven't used a chat forum before!

Ali-OK

Calypso wrote:

Thanks for that - I will post a full SOA in due course to give a better picture (when I'm not feeding my 2 week old!)

I am worried about Lloyds deaminding back the overdraft money as we haven't got that money to hand. But I agree with you cutting back (not one of my strengths I have to admit) and increasing debt repayments. When I do have some time I want to re-do our Budget so I can see where I can cut back further.

Aww...2 weeks old. Yes, you've done well to find the time to post!

Keep the account open and if you're moving all your income to go into A&L, set up a small standing order to pay a little into Lloyds each month to start getting the OD down. If you're very worried, you could contact them to agree an amount per month to pay back.

The other thing is the interest rate on this OD. If you go to https://www.whatsthecost.com there is a snowball calculator. Here is where you input what you can commit to paying towards all your debt each month, the amounts, the APRs, and then it'll tell you in what order to pay, so you pay the least interest and also get the debt down quicker. It will give you a debt free date too - which alot of us are able to bring closer due to overpayments.

Completely appreciate with a brand new baby your financials will be a little up in the air, however it's an important step to finding savings and getting in control of your money.

Good luck!

Ali-OK

Calypso wrote:

I would happily keep the Lloyds account open, however, I think they want £1000 paid in every month. I guess our salaries could go into the A&L account and I could have standing order for the remaining money less bills money to go into our Lloyds account which should satisfy that. I able to reduce the Lloyds overdraft using the limit given by A&L and some other money I am owed. I guess I could then work at reducing the Lloyds overdraft first.

Apologies if I am not posting replies properly, I haven't used a chat forum before!

Yes, sounds like a plan! Check the APR of it and use the snowball calculator to help with amounts, so you pay the least interest over time.

Ali-OK

Which Lloyds account is it? If its a fee paying one, downgrade it to a Classic or Classic Plus (4% interest when in credit, but not much use at the moment to you!) That £10 or £15 a month is another £120 or £180 per year chopped off outgoings! Check, but I'm sure they will allow you to transfer your overdraft with it too (have taken my £3K limit OD, but am not using it).

Calypso

Thanks for all that advice, it's nice to get other people's perspective on it. Also sat down with hubby and went through issues with him. He agrees that we should keep the Lloyds account (Classic Plus) open and transfer some money into that. We were able to make some definitve plans which won't involve increasing our borrowing or going through CCCS - so we both feel a lot happier now. We just need to go through and re-work our budget to up the debt-repayments. Once we have done that I will post an SOA, just to see if anyone thinks we have missed anything or could improve on anything.

In the meantime, many thanks for everyone's advice - definately feel a lot less anxious about it!

Calypso
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Annie_Fanny

Just to make you feel a bit better...

I also have a Lloyd's account but opened a A&L current account to get the incentive payment (you do know that they give an incentive don't you if you open online? - I think it is £25). I just kept my Lloyds account open and transfered an amount each week to reduce my overdraft.

You'll be fine!