How do I get off the debt merry go round?

Jules1978

Until recently I considered myself good with money, I had always been able to juggle my debts, make my payments and feed myself!

However after several years of convincing myself that all I needed was one more consolidation loan or credit card to sort it all out I'm coming to realise the truth:

Every month I am living slightly beyond my means and sinking deeper and deeper into debt.

Last month I sought professional help for the first time and spoke to both CAB and CCCS who were brilliant and gave me a number of ways forward. However I am still unsure of the best course and would appreciate any advice you can offer me.

These are my circustances.

I earn 18000 per annum which is £1165 a month after tax.

of this I presently pay out

£250 to barclaycard on a debt of around £9000 (apr of appoximately 6%)
(minimum payment is £230 pm but I swore when I took the offer I'd overpay so the offer was more like a loan and wouldn't hang around forever)

£123 to RBS loan. debt £3900.

£53 to EGG card on a debt of £2700. Approx 20%apr!!! as I was forced to use the card to finance my last semester as a student and can't afford more than the minimun at the mo.

£17 to LLoyds TSB CC. £900 debt interest free till september.

£150 per month university fees. On debt of £1600.

£100 to my Mum. Who lent me £1600 to tide me over when I was waiting to start my current job.

£195 rent.

£22 per month Talk Talk landline.

£20 per month mobile phone.

£20 per month electric

£22 per month water rates

£20 per month Gas. (average)

£120 per month food

£1113 TOTAL


However in reality each months sees me with numerous unforseen expenses like buses to work, clothing and birthday/christmas presents for family. These take me over my monthly income and further into debt.

The advice I have currently recieved revolves around speaking to my creditors and offering them smaller payments so I have more money for the essentials. This seems fine on the face of things but I'm not 100% certain it's the best way to go. I'm concerned that by taking such an approach I would not only lose the reasonable credit card interest rates I've managed to get but also put off the day I'd be debt free. (which is my ultimate aim).

My logic is that if the banks did allow me to pay less and continued to charge me interest I could be saddled with this debt forever! However I am also aware that my other possible option of bankcruptcy is not without huge disadvantages. Quite apart from my fear of being long term blacklisted I am worried that the court would be loathed to accept my application because I am actually quite close to making ends meat each month and not that deserving a case.

Ultimately I just want it all to go away and wish I had been more prudent when I was younger. I'm now approaching 30 and find myself wanting to get married and maybe even start a family but have no means to do so. I know I must clear up the mess that feel duty bound to pay debts but without some major change to my circumstances it feels like I'll never be able to do this.

Thanks in advance for any help or advice.

spaghetti_monster

I'm sure people will be along shortly to advise you on how to organise the repayments.

One thing that really helped me was to keep a spending diary for a while (I've lapsed a bit and should start again!)

Then you can really see where all the extra bits are going and take control of any overspending.

Hope that helps!
Alex

In_Search_Of_Me

Hi & welcome! As alex suggested I would so a spening diary; have you things you can sell on ebay/car boot? Can you get extra work? Would your mum let you defer your loan to her for a while giving you some space to pay off the higher interest cards. Can you balance transfer any higher cards to lower ones? I would say the main thing you need to do is identify why you have overspent and think of alternative ways of getting pressies etc for less. I know this is hard but a necessity. You can do it though & you have excess in theory (although nothing there for dentist, pescriptions, haircuts etc) but need to have a strict budget that contains everything otherwise you'll come unstuck when the expected unexpecteds come in IYKWIM? Can you earn money in a second job or do any overtime? Also have a look round old style, quidco etc & you'll save even more!! You can do it but like all of us it will take time & effort but well done for tackling it sooner rather than later! Big hugs!

Glitterari

Are you living with your mum or on your own?

If on your own can you move back in with her?

Jules1978

Thankyou fish for your advice.

Glitterari, I am living independently and moving back to the family home isn't really an option I'm afraid.

southernscouser

First and foremost stop overpaying the Barclaycard if it means you are using another card instead! That in itself is a circle and an expensive one!

Have you thought about phoning the CCCS again? A DMP could be very beneficial to you. Basically it's what you are proposing to do but they do the hassle for you and may find it easier to stop interest and charges. :think:

angchris

hiya, first thing that stands out to me is that you are overpaying your barclaycard at 6% by £20 a month when it makes financial sense to take that £20 and overpay your egg card at 20% saving you loads in interest! better still try everything to get rid of the egg card as that 20% is hugeee, try balance transfering or life of balance there are plenty of 0% for 6/9 months cards giving you a bit of breathing space interest free to try and pay off whichever is your next highest interest card

Jules1978

After re reading my budget I feel I should add this:

I also have £1300 student overdraft which will attract interest from spring 2007 and have been refused a new Balance transfer credit card recently so don't think refinancing is an option.

As for budgeting better I'm sure there are savings to be made and keeping a diary should be a good way of finding what these are. That said at the rate I'm going it's going to be a very long haul (perhaps 4 or 5 years) and I'm not sure I trust myself not to borrow again before I finally get debt free.

I would be interested to hear from people who've had experiences negotiating lower monthly payments for their credit cards and there experiences regarding charges and interest. For example my payments to EGG barely touch my actual debt and seem to be solely reducing the interest. How long would I have to default on paying them before they would negotiate a more affordable repayment plan?

Jules1978

I wrote my last post before I saw the last two replys.

Thankyou both for the barclaycard advice. It's spot on and something I'll start on from next month. It was really my pride that was keeping me paying the Barclaycard at a higher rate as I'd promised myself I'd treat it as a loan when I did the BT. However it's time I realised the higher apr Egg should be my priority as this will reduce my debt more quickly.

As for a DMP. I'm hoping I can arrange something in the next month or so to see a specialist advisor at the CAB. Do you know whether the fact I've actually kept up payments to date will count against me at all? I'm a bit worried the banks will see my sudden visit to CAB or CCCS as somewhat manipulative in the light of my ealier good conduct.

Glitterari

Ok, could you move somewhere cheaper - somewhere where the rent includes all bills too.

At the last house share I was at I paid £220 per month inc bills (not phone)

Jules1978

Thanks Glitterati, that would certainly be a good idea.

I am keeping my eyes open for a cheaper place and may be able to reduce my rent by moving in with my girlfriend. That said I'm actually quite lucky to pay just £195 for my flat as most people pay lots more round here.

Also I'm stuck for the next few months as my contract doesn't run out till the autumn.