My Current Situation, Hope You Can Help

phillthered

God, I tell you what, this website is a lifesaver, I wish I had seen this 2 years ago, I dont think I would have got myself into such a stupid mess.
All the below is my own fault, I worked myself into this stupid amount of debt, but if I can get any help to get out of it before Im like 50 would be good.

Im 21, and I owe somewhere in the region of £16'500. I say in the region, because I am not too sure how much I owe, and where.
Basically, it sits like this;
I owe out the following.
HSBC: £5400
Egg: £8300
Barclays: £1300
HSBC Credit Card: £1500.
Thats all the unsecured debt out the way, I also have a hire purchase agreement with Vauxhall. Its for about £10000, again, I say about because I just know that my agreement is £210 a month for 5 years, which works out at about £12600, but I have had this agreement for 12 months now, so I'll have paid off about £2250 of it.
I dont count the car finance agreement in my unmanageable debt section because its a tool I need in order to get the money to pay the debt! I use it commute to and from work, I cant earn money to pay the debt off without the car, thats the way I look at it.

The way that this all came about was that I left a job for a bigger and better one, my orignal salary, before all the debt was £810 a month, at this point I had the HSBC loan and not the Egg one, still had the overdraft, but it was interest free from my time as a student. Then Barclays found out about the fact I was in work and put the interest on. Also, I noticed that I could get a better deal with Egg, so I decided (in my infinate wisdom :-p) to consolidate the loan and the overdraft into one big loan with Egg. And thats when the problems started.
Rang HSBC to get a settlement figure AFTER I had the loan amount approved by Egg, and the money in the bank, and paid Barclays off, only to find I hadnt borrowed enough. Rang Egg to ask for more to borrow, they said no. So as I stalled, I fritted the money away. Paid two credit cards off, went on holiday twice, and managed to clear maybe £3000 of debt at the time.
Whilst all this was going on, I got another job, paying a lot more money, about £1200 a month in total so I thought I could handle the extra debt, and guess what happens? I lose my job! Great! So I have gone back to a salary of around £830 a month now, with a stupid amount of outgoings!

Now, I have been on National Debtline and looked at the template letters to send to creditors to advise of problems with payments. I proposed that I have a payment break of 6-12 months (set your sights high I thought :-p) and I thought in that time I could increase my salary again. However most of them have either not responded, or said that they need a budget plan off national debtline, or CAB, and that the one I sent, signed by myself wasnt worth the paper it was written on.

So, after a period of burying my head in the sand, I found this site, and I read that I actually have rights!

I need to get out of this situation as fastly and cheaply as possible, I am living with my parents still, paying £200 a month keep, on top of my car and everything else. I have a girlfriend, who like my mum and dad, is clueless about the state I have got myself in, and I want it to stay that way, they have enough problems of they're own without worrying about my sitaution.

I have had a thought about a couple of solutions but cant find any straight answers on if they are feasible.

First one, and probably the most important one;
I want to move in with my girlfriend, now we both think that getting a mortgage will be the best solution because we will be investing money in something that is ours (remember she doesnt know about the debts) rather than renting and wasting money.
Would it be possible to get a mortgage for the property, which incorporated the loans into the mortgage itself, like a secured debt or remortgage type of thing (hope that makes sense). If I could, then I would break the news to my girlfriend and try that avenue.
I dont think this will work but its worth asking!

The other option I have read about is an Individual Voluntary Arrangement.
I dont know too much about this, other than what I have read on non charity debt help sites, and I dont honestly believe what they say. I know that its a legal agreement that can help me keep items I have secured finance on (e.g. my car) but is this going to be my best solution?

I really hope you can help, this is the first time I have explained this, I have never told anyone the problems I have, and cant bring myself to speak to people about it, even the charities, because I feel stupid. I know that in itself is stupid, but I feel that if I get pointed in the right direction by all of you then I can go to the helplines knowing what I am talking about.

Thanks everyone, your help will really be appriciated.

Debt_Free_Chick

phillthered wrote:

God, I tell you what, this website is a lifesaver, I wish I had seen this 2 years ago, I dont think I would have got myself into such a stupid mess.
Now, I have been on National Debtline and looked at the template letters to send to creditors to advise of problems with payments. I proposed that I have a payment break of 6-12 months (set your sights high I thought :-p) and I thought in that time I could increase my salary again. However most of them have either not responded, or said that they need a budget plan off national debtline, or CAB, and that the one I sent, signed by myself wasnt worth the paper it was written on.

That's odd - in fact, it's rubbish! However, you do need to include a full financial statement and include full details of ALL your debts and required repayments. Earlier you said you weren't sure of how much you owe - you must nail this down and then complete an accurate financial statement. If you want, you can post it here and we can comment on any apparent omissions.

The other important thing is that you must make an offer to pay every creditor something. You first deduct your living expenses from your income. You are then (hopefully) left with surplus income. Does this cover all the minimum repayments on your debts? If yes, then I don't see that you can negotiate anything - it might be worth asking for lower or frozen interest. But you can't ask for a repayment holiday if you actually have the means to make the repayments.

First one, and probably the most important one;
I want to move in with my girlfriend, now we both think that getting a mortgage will be the best solution because we will be investing money in something that is ours (remember she doesnt know about the debts) rather than renting and wasting money.
Would it be possible to get a mortgage for the property, which incorporated the loans into the mortgage itself, like a secured debt or remortgage type of thing (hope that makes sense). If I could, then I would break the news to my girlfriend and try that avenue.
I dont think this will work but its worth asking!

Are you serious? You have debt that you can't manage to pay off and you want more debt? You're not in a position to afford a mortgage, are you so why on earth are you even thinking about it?

Anyway, you're right - you can't have a mortgage for an amount that will pay for the house and existing debts. Let's say you intend to buy a property for £100k. Firstly, you'll need a 5% deposit so you need £5,000 cash. The building society then lend you £95k to cover the rest of purchase price. Now the BS will only lend you 95% of the price of the property and what you borrow is needed to pay the seller. In fact, you never even see £95k as it goes straight to your solicitor and then to the seller's solicitor.

The BS will only lend against the house. If, in 5 years time, your property is worth £110k, then you could probably borrow some more e.g. 95% of £110k is £104,500. You would need to pay off your existing mortgage, let's call it £95k meaning that you might be able to borrow cash of £9,500. But watch it ... if you keep doing that then you'll never pay for the property and you may end up bankrupt!

Anyway, if you've not been keeping with your repayments or, as you've tried to come to an arrangement with them, your credit record is soon going to be shot to pieces. You are likely to find it difficult to get any more debt for up to 6 years now.

The other option I have read about is an Individual Voluntary Arrangement.
I dont know too much about this, other than what I have read on non charity debt help sites, and I dont honestly believe what they say. I know that its a legal agreement that can help me keep items I have secured finance on (e.g. my car) but is this going to be my best solution?

Don't go to a non-charity debt "help" site. The reason they suggest an IVA is that there's lots of lovely fees for them to earn. Lots - you would have to find fees of at least £5k. And an IVA only really works if you have a lump sum (which you don't) or lots of surplus income.

Don't go to a non-charity company - they just want your money. Stick with National Debtline. Remember, you can call them at any time for specific advice on any aspect of debt management. Why not call them about the lenders who say that your Financial Statement is not acceptable?

It seems to me that you are possibly living above your means. OK - you need a car to commute, but did you really need a £10k car? Plenty of people manage with a car costing as little as £500.

As you live with your parents it should be relatively easy to knuckle down on spending (beer, mobile, going out, holidays) etc whilst you pay the debt off. Perhaps the other option is Bankruptcy - have a look at the factsheet on this on the National Debtline website.

You seriously need to get a grip on your current situation and put off all thoughts of any more debt. You'll need to go without certain luxuries for a while or find a way of supplementing your income with a second job.

Sorry - that sounds like a right telling off, but you seem to need it. Get yourself straight now and learn some thrifty ways for the future, so you end up with £10k in the bank for you rather than owing the bank £10k.

margaretclare

Hi there

The first thought that springs to mind very strongly is - please please please don't think of moving in with your girl-friend as a way of getting out of what you call your 'current situation' and especially as she knows nothing of this 'situation'. There is no place for lies, half-truths, concealment or subterfuge within any relationship that hopes to survive any length of time. I speak from long experience in these matters.

You're only young, you're 21, you have loads of time and you can learn. This site is an excellent place to learn. Read every word that Martin has ever written. Basically - spend less, and if you can't earn any more, then spend less and look at every last penny you spend on a daily/weekly/monthly basis. Every penny - look at it twice before parting with it! Do not spend any more on credit cards, don't take out any more loans and above all do not, do not consider a mortgage until you've paid off most or all of these debts and got some savings under your belt. You're fortunate in that you only pay £200 for your keep at your parents' home. I doubt very much whether that is economic, in other words your parents are subsidising you very heavily. Once you move in with your girl-friend you'll find you have to take a bigger share of the day-to-day expenses, down to the last loo roll and jar of instant coffee. 'Wasting money on rent' isn't necessarily a waste - there are a lot of costs with a mortgaged property including not least, home maintenance, painting and decorating, buildings insurance, as well as costs of the purchase, legal etc etc. Also renting does give you the flexibility to move if you need to - once you have a mortgaged property and you want to move you then have to sell, and this isn't always easy.

You earn £830 a month, you pay £200 for living at home. That leaves you £630 a month (after travel to work etc) and you should keep up the minimum payments on your debts plus try to pay off the highest-interest rate loans/cards first.

Just a few thoughts.

Best wishes

Margaret

JasonW_2

I think one of the first things you need to do is be honest with yourself, then to your girlfriend and family, as hard as that sounds.

I don't mean to sound harsh but the truth is the only thing thats going to help you and telling you everything will be fine isnt going to help you or your situation. There is no reason to be embarassed on here, but from your post I dont think you are. Are the amounts accurate and have you included everything?

You really need to have spot on figures to get a real idea of the problem as pain staking as that is. You have tried to live beyond your means and are now in a position where your credit rating is now probably non existent, so forget the dreams of a mortgage cos there is no way you can afford it, and any lender would likely refuse you anyway, doing more damage to your credit risk.

Can you post back with correct amount and interest rates on each and include any other expenses you havent already? I mean like mobile phone contract, insurance, car insurance, etc. Do you REALLY need as new a car as you have? Nope. You could sell it or hand it back, and that is one less large debt to worry about. You need a car for your job? Fine, but you *could* get a cheape car for a couple of grand if your parents could help or someone else could, and use the money you were paying for the HP towards your other debts. I know you probably wont like that suggestion, but it will help massively, but of course I dont live your life and there are other things to take into account.

Good luck with clearing your debts, and please post back with more details so people can help better. Definitely listen to debtline as well and see CAB.

JW

pickle

Whatever you do don't buy a house for a while - the market will be going down in my opinion and you could find yourself in negative equity which would be disastrous. Get the debts down first - then save for a decent deposit. It's cheaper to rent than have a mortgage at the moment and interest rates will go up in the near future. When you eventually look at a mortgage add in a few percent on top of the variable rate as you have to allow for changes in interest rates. I always look at how i'd cope with 10-12 % interest rates - because i remember when they were 15%. In 2-3 years i think you'll be able to buy a house at a lower price than at the moment so you have an opportunity to get things under control financially and benefit from cheaper house prices. At 21 years old you have time on your side.

littleangel

Hi Phill,

Sounds like there are two really important things you need to do -

(1) Find out EXACTLY how much you owe and what the terms are - it's only then that you'll be able to make decisions about your debts - and this site is the place to get proper advice and great tips.

(2) Talk to your parents and your girlfriend. Could you pay a little bit less to your parents each month for your board in the short term to free up a bit of extra cash? You can't move in with your girlfriend without being upfront and honest with her about your financial situation. If the fact that you're in debt is going to put her off then she's not the one (see, this site isn't just about financial advice, you get relationship advice for free too!). You say that you don't want them to worry about you - that's understandable, but being honest about your situation shouldn't cause them worry - they will feel honoured that you've confided in them, and it proves that you have the courage to deal with your problems head-on.

Being in debt isn't something to be embarrassed about, it happens to almost everyone at some point in their life - and the people you care about won't think any less of you for admitting it. But they will think less of you if you hide it from them!

Good luck - there is so much great advice on this site, you will come out the other side!

oldnick

From personal experience I would be very wary about an IVA. I did one and discovered that, despite the fact that I had succeeded in repaying every penny I owed, I ended up with a huge black mark on my credit rating.

A friend who had been in a similar circumstance had declared himself bankrupt. Once he was discharged he had no problem getting a mortgage etc.

I asked an aquantance who worked in the banking sector for advice as to why I seemed to be in a worse position than my friend.

What he told me was that I had been in a position that would have justified declaring myself bankrupt and that by doing an IVA I had shown myself to be financially naive, and therefore a bad risk.

I was gutted!