I shouldn't have the debts I have got - a way out?

AFCChris

I have debts on cards and loans totalling around £38,000 but I am thinking I shouldn't be in this situation and now is the time to do something about it with some careful consolidation and some proper budgeting.

The reason I say that I shouldn't be in this situation is that I have been earning well for some years, but I'm still tending to "take from Peter to feed Paul" like I did when I was less well off. Between my wife and me our household income has gone up by around £11,000 since the middle of last year so I want to sort myself out now and need some help and advice from the kind people on here.

Out of the £38,000, £12,000 is on a personal loan, £13000 is outstanding on a PCP style car loan, and the rest on credit cards.

I was thinking of seeing about re-mortgaging to sort myself out as I know that would be the cheapest way to do it and spread the term out. I have a mortgage of £168,000 due to moving to a bigger house last year and I need to negotiate a new deal to come into effect around July as my 2 year fixed rate of 3.89 stops then. My house is worth even more now and I would be able to re-mortgage for a higher amount but I don't think it would be able to cover the £38,000 so I wonder what's the other options I have.

I don't want to go to the daytime TV ad companies advertised by celebrities as I have had a bad experience with those in the past. I wonder if it's better to let the car loan run it's course and just sort out the others into one loan?

Once I get everything down to one or two payments then I will start budgeting, bin the cards and start again.

Any help would be great!

jonesMUFCforever

First of all make a detailed list of all incomings and outgoings.

Assuming your income exceeds outgoings you have a hope of sorting yourself out.
I think you will be stuck with your car loan until it runs out or the car is sold as I believe the interest is added at the beginning so even if you had funds to repay early you save nothing (this was my experience of Ford credit when I bought a new car through a similar scheme a few years ago).
At what rate is your present Ploan? Have you contacted your bank to see if they will consolidate at a lower rate. Competition is fierce for PLoan business at the moment and some banks now have price matching to stop you taking new loans with rival banks.
Credit cards - how many? Do you have any with 0% interest. Will your credit rating allow you to apply for new cards to consolidate any or all of this debt. If you can do this go for it even though a lot of credit cards now charge a balance transfer rate of 2%.Pay off as much a you can while interest is free or low and never use the cards for purchases whilst you have a balance transfer outstanding.
I would not recommend putting unsecured debt on to a secured basis unless this is a last resort as you could lose your home if payments are not maintained. However if you wanted to pursue this you could ask for a further advance for say 7 years to pay off debt.
Also you are right to shop around for a new mortgage deal but it is worth remembering interest rates are higher now than when you took out your fixed rate so you will have a higher monthly repayment when your deal runs out.

mightymo_2

Just a quick note about remortgaging to pay off your debt: I am not a whizz with figures so I don't know if this is correct, but I have recently read in a finance mag "if you moved £10k of credit card debt to a 20 year mortgage at 5.99% you'd pay £7181.60 in interest payments on the debt over the term. if you reduced the term to five years the interest payment on £10k would fall to £1596.80".

Personally don't think it is a good idea transferring your debt to your mortgage. Try to pay it off by getting cheaper interest rate loans/credit cards.

Mo

svmitche

I would also not recommend adding to your mortgage. Dependant on your age, this could leave you short in the future and it is better for you to try and keep 'short term' debt, such as you have at the moment, rather than add to a long term debt.

I concurr with ejones. You need to sit down and do your budget first, or at least sort out who you are paying what to, what your monthly interest is and whether you have any space to do some balance transferring.

The biggest point is to bin the cards now. Do not spend on them as from now and cut them up, just to make sure. If you were able to post the card limits, what you have got on them and what the interest is, you may be able to get some more help from the MSErs here.

Alternatively, if you feel that you need some professional help, please go to your local CAB (http://www.citizensadvice.org.uk/), call the Consumer Credit Counselling Service (http://www.cccs.co.uk/), or the National Debtline (http://www.nationaldebtline.co.uk/). All of these organisations can work with you to sort out the debt you have and a repayment plan for it. If you feel that you do not need to got quite this far, then yay!

In conclusion, I just think that adding to your mortgage is opening a whole heap of trouble. If you are able to do some switching and saving, then you'll be much better off in the long run.

Good luck, keep at it and let us know how you get on!!

deemy2004

AFCChris wrote:

I have debts on cards and loans totalling around £38,000 but I am thinking I shouldn't be in this situation and now is the time to do something about it with some careful consolidation and some proper budgeting.

I was thinking of seeing about re-mortgaging to sort myself out as I know that would be the cheapest way to do it and spread the term out. I have a mortgage of £168,000 due to moving to a bigger house last year and I need to negotiate a new deal to come into effect around July as my 2 year fixed rate of 3.89 stops then. My house is worth even more now and I would be able to re-mortgage for a higher amount but I don't think it would be able to cover the £38,000 so I wonder what's the other options I have.

Any help would be great!

Yeh add the debt to your mortgage, as that will reduce dramatically the interest rate your being charged on the debt.

Next step would be to pay down your mortgage , i.e. lump sum payments as and when you are able to and within the terms of your mortgage i.e. if their are any penalties built in during the early years of special offers. In which case save the lump sums until you are able to pay down the mortgage without extra charge and thus reduce the mortgage length.