Concerned - Credit card debt

UncleC76

Hi

A first timer looking for some friendly and helpful advice please!

Credit card debt - I have plenty:
£7000 Virgin
£5500 HSBC
£3500 M&S
£3300 Egg
Total £19500

I really need to sort this as i have let it creep up over the last few years for various reasons, and now am struggling to see how i'm ever going to pay it off. I'm in my mid 30's and have used cards for the last 10 years. My payment history is excellent, my credit score is estimated 815 and i have no CCJ's (Possibly missed one payment long time ago), but i seem to have ran out of options for 0% balance transfers or any new cards and the interest rates on the cards i have are a real problem. I was recently turned down for a Sainsburys card, although i have recently obtained a new contract mobile phone.

I also have a personal loan which has 12 months to run (was for £7500, outstanding balance £2500) so i'm considering options for further borrowing to consolidate the cards. However, i'm aware this may be difficult with the amount of outstanding debt.

I am single and a home owner (house value £105k - outstanding mortgage £40k) earn a decent salary (£25k p.a). I realise that increasing the mortgage is an option but it is a last resort for me. I am paying as much as i can afford each month to get the card debt down but im not making significant progress.

Any advice appreciated

Cheers

tealady

Hi
If you put up your SOA then we can help you budget a bit better.
However I would cut your cards up and live on cash (just keep one card for emergencies(the one with the lowest APR.
Have a look at the snowballer as well, its an eyeopener when you realise how much the cards cost you in interest, that "bargain" bought on credit isn't so cheap when you add the interest on the debt.

indierocker85

Let's have a look at your statement of affairs (SOA) http://www.makesenseofcards.com/soacalc.html
And we can see what we can do with it, and definately have a look at a snowball calculator http://www.whatsthecost.com/snowball.aspx. They are great for showing you the best ways to clear the debt, and how to do it while paying less interest, and also they will show you your debt free date providing you can stick to the plan. However, before you do the snowball, lets see a SOA first

UncleC76

Here is my SOA:

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 1
Number of children in household......... 0
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 1600
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 1600

Monthly Expense Details
Mortgage................................ 315
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 78
Electricity............................. 30
Gas..................................... 10
Oil..................................... 0
Water rates............................. 23
Telephone (land line)................... 11
Mobile phone............................ 30
TV Licence.............................. 12
Satellite/Cable TV...................... 40
Internet Services....................... 10
Groceries etc. ......................... 60
Clothing................................ 50
Petrol/diesel........................... 200
Road tax................................ 20
Car Insurance........................... 47
Car maintenance (including MOT)......... 30
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 13
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 10
Entertainment........................... 120
Holiday................................. 0
Emergency fund.......................... 0
Football Season ticket.................. 36
Total monthly expenses.................. 1145


Assets
Cash.................................... 0
House value (Gross)..................... 105000
Shares and bonds........................ 0
Car(s).................................. 7000
Other assets............................ 0
Total Assets............................ 112000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 40000....(315)......5.2
Total secured & HP debts...... 40000.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
PERSONAL LOAN..................2500......235.......7.9
VIRGIN CARD....................7000......120.......21.9
HSBC CARD......................5500......130.......29.9
M&S CARD.......................3500......80........25.9
EGG CARD.......................3300......80........19.9
Total unsecured debts..........21800.....645.......-


Monthly Budget Summary
Total monthly income.................... 1,600
Expenses (including HP & secured debts). 1,145
Available for debt repayments........... 455
Monthly UNsecured debt repayments....... 645
Amount short for making debt repayments. -190

Personal Balance Sheet Summary
Total assets (things you own)........... 112,000
Total HP & Secured debt................. -40,000
Total Unsecured debt.................... -21,800
Net Assets.............................. 50,200

Jesthar

Hey, Uncle, and welcome!

Hmmm - I'm going to be straight with you, this is *very* tight. You may be able to do it as it stands, you may need a Debt Management Plan. It will depend on what options you have and how far you can cut back.

UncleC76 wrote: »

Here is my SOA:

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 1
Number of children in household......... 0
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 1600
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 1600

Monthly Expense Details
Mortgage................................ 315
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 78
Electricity............................. 30
Gas..................................... 10
Oil..................................... 0
Water rates............................. 23 - are you on a meter? If so, this is high useage for one person - check for leaks and reduce your useage as much as you can.
Telephone (land line)................... 11
Mobile phone............................ 30
TV Licence.............................. 12
Satellite/Cable TV...................... 40 - sorry, you can't afford that right now. Freeview time.
Internet Services....................... 10
Groceries etc. ......................... 60 - this is very good, keep it up! :T
Clothing................................ 50 - this needs to go essentials only for a while
Petrol/diesel........................... 200 - try and cut down on non-essential journeys if you can
Road tax................................ 20
Car Insurance........................... 47
Car maintenance (including MOT)......... 30 - you'd probably be better paying part of this off your cars instead, unless this is a known amount or your car is unreliable. You can always use a card if you need to in an emergency.
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 13
Contents insurance...................... 0 - is tis in with the buildings insurance?
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 10
Entertainment........................... 120 - this needs to go on paying off your cards, sorry
Holiday................................. 0
Emergency fund.......................... 0
Football Season ticket.................. 36 - very, very sorry - but you can't afford this right now
Total monthly expenses.................. 1145


Assets
Cash.................................... 0
House value (Gross)..................... 105000
Shares and bonds........................ 0
Car(s).................................. 7000
Other assets............................ 0
Total Assets............................ 112000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 40000....(315)......5.2
Total secured & HP debts...... 40000.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
PERSONAL LOAN..................2500......235.......7.9
VIRGIN CARD....................7000......120.......21.9
HSBC CARD......................5500......130.......29.9
M&S CARD.......................3500......80........25.9
EGG CARD.......................3300......80........19.9
Total unsecured debts..........21800.....645.......-


Monthly Budget Summary
Total monthly income.................... 1,600
Expenses (including HP & secured debts). 1,145
Available for debt repayments........... 455
Monthly UNsecured debt repayments....... 645
Amount short for making debt repayments. -190

Personal Balance Sheet Summary
Total assets (things you own)........... 112,000
Total HP & Secured debt................. -40,000
Total Unsecured debt.................... -21,800
Net Assets.............................. 50,200

How many times have you applied for credit (including phone tarrifs) in the last six monts? If it's three times or more, you'll need to wait six months before applying again or it will affect your credit rating. You may have to accept a low APR life of balance transfer instead. I take it there is no spare room on the lower APR cards to transfer some of the balance of the higher cards onto?

As I said, this is *very* tight. If you have any items you could sell on places like eBay to raise a few extra pounds, it would help. But even with that you are going to have make a lot of cutbacks, and preferably find ways to up your income too.

It's not all doom and gloom - if you can make it through the next 12 months, you will have paid off the loan and can throw that money at clearing the cards. In the meantime, you need to throw all spare cash you can at the HSBC card, as that has the highest interest rate, and just pay minimum payments on the rest until that card is cleared, then move on to the next highest APR.

One other possible option is a mortgage holiday for a few months if you are allowed, or go interest only for a while - but if you do that you still need to make all the other cutbacks and target all

I know this is probably not as upbeat as you'd liked to have heard, but don't give up! It's going to be a long road back from here, but it can *just* about be done without a Debt Management Plan if you go for it.

~Jes

[Deleted User]

If your water is not metered and you are the only person in the house consider getting a meter installed.

Is your mobile phone still tied into a contract? Can you lower the tariff until the end of the contract? If you are out of contract consider a SIM only for a while (approx £10/£15/month for unlimited texts and 200 or 300 anytime minutes - some very good deals out there), or else go PAYG depending on your usage.

Agree, satellite/cable TV is a luxury at the moment - one that you cannot afford. If you are stuck in a contract, go down to the lowest package possible until the term of the contract ends.

£50/month on clothing is quite a lot - this will need to go to essential items only for now.

£120/month in entertainment is very high, you need to cut this right back, or out altogether until your debts are under control. Same for football season ticket.

If you make these small changes you should break even every month and prevent yourself from getting into further debt.

Definately cut up all but one of the CC's (keep lowest ARP card and use only in absolute emergancies)

In order to make descent inroads into your debts, you should try and pay more than the minimum each month, to do this it seems that you'll have to do more than cut back on expenditure, you'll need to increase your income as well. Can you "up your income" any? Overtime? Take a second job? Sell thinks on e-bay/gumtree/amazon?

Good luck

UncleC76

Thanks for the reply, it's very helpful:

Water rates - I'm not on a meter due to the location of my house apparently the supply is too old and external work would have to be done to upgrade to enable me to have one so £23 is the standard rate.

Satellite TV - It's mainly Sky Sports which bumps up the price, i suppose i could do without

Clothing - I can reduce this to zero most months

Petrol - My car averages 25mpg, and although i love it i am seriously considering a more economical motor!

Car maintenance - I averaged the price of service, MOT and tyres

Contents insurance - Yes it's included with the buildings

Entertainment - It was hard to estimate that figure, occasionally it will be less.

Season ticket - Unfortunately i have already paid for this on a Barclaycard Premiership card (0% for the life of the tkt purchase) so the monthly payment is as stated.

I recently got the new mobile phone contract but was turned down for a Sainsburys credit card. I also was turned down for a Shell credit card but can't remember if it was in the last 6 months. I have no room for balance transfers to lower apr on my existing cards.

I am trying my best to cut back wherever possible and am hoping to raise a chunk of money by (reluctantly) downgrading my car. I probably ignored this problem until the turn of the year when i realised i was struggling to meet my monthly payments.

Clearing the loan will be welcome albeit 12 months away. I am very tempted to ask to increase the amount but am very wary of my credit rating due to the outstanding debts, even though i have an excellent history.

I will speak to the mortgage company, i have to admit i don't know what they may be able to offer.

dancingfairy

You have mentioned speaking to your mortgage provider - I hope this is with a view to going interest only or taking a payment holiday for a short while only?
Do not consolidate your debts - this will turn unsecured debts and could put your home at risk - not to mention paying off your debts for a lot longer and earning the bank way more interest in the process.
I have heard something about you can get help with mortgae costs if unemployed but will not get any help if you turn unsecured debt into secured debt - I can't recall if that's mortgage insurance or benefits or what.
And to be fair consolidating rarely solves the problem - many, many people have consolidated once, twice, three times or more each time to end up in a worse position without tackling the underlying causes.
You may need to consider a dmp (debt management plan) from one of the debt charities - have you given CCCS or National Debtline or call or your local CAB?
df

Jesthar

Hi Uncle,

To be honest, I think changing your car is the only sensible thing to do with it. It's costing you a fortune in petrol, insurance and servicing, and you desparately need that money elsewhere now. Do some research and try and get something economical which is cheap to tax and insure too. No finance for it, though, as car finance is a rip off and you can't afford it - you'd need to pay for it outright from the proceeds of the sale of your current car.

I also think you need to start a spending diary so you can see where all your money is going every month, as you say you had to estimate entertainment? To be honest, you can't really afford anything much in your entertainment budget at all for a while - certainly you can't afford fo it to 'occasionally' be under £120, it needs to be under £12 constantly. I know that's going to be hard, but that's how tight things are for you right now! And you definitely need to give up paid TV, sorry - you have your season ticket, so you're not losing everything there. Just make sure you get value from it by going to all the home games you can! No away games, though - too expensive.

If you can get a mortgage payment holiday (as dancingfairy says, DON'T secure debt on your house) for a month or two, downsize your car, make some big cutbacks and throw every spare penny you have at your cards, you stand a reasonable chance of managing this situation, but it is borderline! Otherwise you are definitely going to need one of the Charities Debt Management Plans. That's nothing to be scared of; as although it means a trashed credit rating for several years, it will get your debts dealt with.

~Jes

UncleC76

Thanks again people. :beer:

A quick progress update:
Car - I am reluctantly resigned to selling and am actively looking at a handful of cars in the £1500-2000 range so hopefully i can raise around £5000 from this. Also the insurance will be reduced by £150-200 per year and the tax and running costs a bit cheaper.

TV - I rang Sky to cancel my TV and they said they would give me Sky sports free for the next 3 months :j The result of which is around £25 a month saving. I will review the TV situation after 3 months, will give me time to consider my broadband options as it's with Sky also. In addition, i only have my BT line because i need it for the Sky broadband, if i get Virgin broadband i can get rid of the landline.

Loan - I am meeting with A&L next week to see if there's any possibility of borrowing more to pay some of the card debt. My current loan rate is 7.9% which in comparison with my credit cards is superb.

Mortgage -Unfortunately i can't get a payment holiday as my current deal is a 3 year fixed. Although i have 18 months left and my current rate is 5.6%. Hope to get a better rate once this has expired.

Clothing - Will be 0 for the forseeable future!

Entertainment - Going to really try and limit myself with this. It's hard as i'm sure everyone appreciates but if i can cut to 1-2 nights a month i will be satisfied.

I am committed to this now, support is greatly appreciated. :T

DVardysShadow

UncleC76 wrote: »

Loan - I am meeting with A&L next week to see if there's any possibility of borrowing more to pay some of the card debt. My current loan rate is 7.9% which in comparison with my credit cards is superb.

As I see it, and as has already been stated, your position is very tight. Your only hope is for the loan you have currently to fall off in 12 months. The problem with putting any of your CC debt to another loan is that while it might ease your shortfall, it won't wipe it out. And a loan is on a much less flexible schedule than the CC. You won't just have the interest to meet each month, you will have to pay down capital too. So if you put too much cc debt onto your loan, you will find yourself on a very demanding treadmill.

Plus, if I was a lender I would not give you a loan anyway, which means you will be borrowing from the sharks.

I would suggest investigating taking your mortgage Interest only for a year, or getting a payment holiday, just to cover the period to the end of your loan.