options for tackling debt?

ali-t

I have worked out today how much I am paying out each month on cards, loans, mortgage etc and have come to the frightening conclusion that my outgoings are around £500pcm more than what I am bringing in.

As part of a plan to tackle the debt and get it paid off as quickly as possible I am going to devise a multi-pronged approach but was wondering what you all thought of the idea of trying to change my mortgage to interest only for a year or two and putting all the money that currently goes towards repayment into my debts?

It may be a stupid idea but at the moment my mortgage payments are around £500pcm and if I only paid the interest I would be paying £86pcm, leaving over £400 to tackle the debts.

I often have extra money coming in as I do some freelance work but given the economic climate I see this drying up after this year but I use this money to bail myself out every few months so I tend not to keep racking up much extra debt.

Barricade

I think its worth filling out a SOA to see if you can avoid having to reduce your mortgage payment. Any reduction in debt is a bonus, but personally I think doing an interest only mortgage isnt* worthwhile, unless you can additionally save a lump sum to pay off an amount when you change back to full monthly payments.

I'd paste the SOA Link, but it wont let me

Barricade

Tixy

Hi

This is the statement of affairs link http://www.makesenseofcards.com/soacalc.html and that is the best starting point. People may have suggestions to help you tackle some of that £500 deficit before you start thinking how you can restructure your finances.

GeorgeUK

Other than increasing your available expenditure (possibly by changing the mortgage to interest only), have you tried doing a SOA on the SOA calculator? Are there any savings in your household expenditure you can cut back on or possibly get cheaper?

Have you looked at the possibility of getting a 0% credit card to shift some of the high APR debt to?

ali-t

I did a SOA but think there are a few things missed out that don't feature on there like bank charges (£5pcm, my cleaner £60pcm and expenses for the dogs £350pcm although I have added them into the child section). I know these things may appear to be frivolous expenses but I would rather cut down in other areas than have the dogs left at home alone all day when I am working.

As well as working full time I am also studying so cleaning the house myself isn't a huge priority when I have studying to do (excuses excuses...)


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................ 1800
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 350 - I have a lodger and this is her rent so although it is regular it isn't guaranteed if she moves out
Total monthly income.................... 2150[/b]

Monthly Expense Details
Mortgage................................ 500
Secured/HP loan repayments.............. 150 - paying for car
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 120 water charges are included here
Electricity............................. 71 gas charges included here too
Gas..................................... 0
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 46.45 includes broadband and lowest tv package
Mobile phone............................ 20
TV Licence.............................. 12
Satellite/Cable TV...................... 0
Internet Services....................... 0
Groceries etc. ......................... 200
Clothing................................ 30
Petrol/diesel........................... 120
Road tax................................ 18
Car Insurance........................... 40
Car maintenance (including MOT)......... 30
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 300 this takes account of dog walker, dog food, training classes etc
Medical (prescriptions, dentist etc).... 5
Pet insurance/vet bills................. 45
Buildings insurance..................... 10 this covers contents insurance too
Contents insurance...................... 0
Life assurance ......................... £31.34 mortgage cover and critical illness insurance
Other insurance......................... 0
Presents (birthday, christmas etc)...... 35
Haircuts................................ 20
Entertainment........................... 30
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 1833.79


Assets
Cash.................................... 0
House value (Gross)..................... 135000
Shares and bonds........................ 0
Car(s).................................. 9000
Other assets............................ 0
Total Assets............................ 144000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 50000....(500)......0
Hire Purchase (HP) debt ...... 4500.....(150)......0
Total secured & HP debts...... 54500.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
A&L loan.......................6000......405.......0
Barclaycard....................6500......150.......0
debenhams......................1100......41........0
Total unsecured debts..........13600.....596.......-


Monthly Budget Summary
Total monthly income.................... 2,150
Expenses (including HP & secured debts). 1,802.45
Available for debt repayments........... 347.55
Monthly UNsecured debt repayments....... 596
Amount short for making debt repayments. -248.45

Personal Balance Sheet Summary
Total assets (things you own)........... 144,000
Total HP & Secured debt................. -54,500
Total Unsecured debt.................... -13,600
Net Assets.............................. 75,900

Created using the SOA calculator at www.makesenseofcards.com.
Reproduced on Moneysavingexpert with permission, using Firefox browser.[/font]

GeorgeUK

One of the things that is killing you is the loan payment. Is 6k the amount you have left to pay? As you need to make a large dent, this is one of the things i would look at tackling first. I would apply for a Virgin credit card (as this allows money transfers as part of the 0% 14 month promotional offer). I would try to get a credit limit of 6.5k : 6k + 4% fee (you can only use 95% of the available limit). This would allow you to pay the loan off early (can you check to see if you can get an early settlement figure). Minimum monthly payment is currently 1% so you should have lots more to throw at the debts.

Also was there any Payment Protection Insurance for this loan? Was this missold?
http://www.moneysavingexpert.com/reclaim/ppi-loan-insurance

Tixy

Hi

You can add in new lines on the Soa calculator (or just put the costs in somewhere else!)

ali-t wrote: »

I did a SOA but think there are a few things missed out that don't feature on there like bank charges (£5pcm, my cleaner £60pcm and expenses for the dogs £350pcm although I have added them into the child section). I know these things may appear to be frivolous expenses but I would rather cut down in other areas than have the dogs left at home alone all day when I am working.

As well as working full time I am also studying so cleaning the house myself isn't a huge priority when I have studying to do (excuses excuses...)


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................ 1800 are you able to do any overtime?
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 350 - I have a lodger and this is her rent so although it is regular it isn't guaranteed if she moves out is there space for a second lodger as well?
Total monthly income.................... 2150[/b]

Monthly Expense Details
Mortgage................................ 500
Secured/HP loan repayments.............. 150 - paying for car
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 120 water charges are included here
Electricity............................. 71 gas charges included here too have you recently checked you are with the cheapest supplier? and the best tariff? (online tariffs can be quite a bit cheaper than standard).
Gas..................................... 0
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 46.45 includes broadband and lowest tv package you could consider using freeview and getting a landline & internet for around £20
Mobile phone............................ 20
TV Licence.............................. 12
Satellite/Cable TV...................... 0
Internet Services....................... 0
Groceries etc. ......................... 200 For one person this is a lot. Try to reduce it down. You should be able to manage on £100 but maybe start by trying for £140 then £120 next month. Try meal planning for the week (or month) before you go shopping and try using own brands for some items.
Clothing................................ 30 possibly cut this right down for a bit, wear what you have, sell what you don't wear on ebay or similar.
Petrol/diesel........................... 120
Road tax................................ 18
Car Insurance........................... 40 do you shop around at renewal? follow the tips on this site for earning cashback etc.
Car maintenance (including MOT)......... 30
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 300 this takes account of dog walker, dog food, training classes etc you mentioned £350 above? are the training classes short term or ongoing? is your walker charhing competative rates compared to others in the area?
Medical (prescriptions, dentist etc).... 5
Pet insurance/vet bills................. 45
Buildings insurance..................... 10 this covers contents insurance too
Contents insurance...................... 0
Life assurance ......................... £31.34 mortgage cover and critical illness insurance have you shopped around recently to ensure you still have a good deal.
Other insurance......................... 0
Presents (birthday, christmas etc)...... 35 you could cut this
Haircuts................................ 20 try going slightly less often or try a local hairdressing college for cut price cut.
Entertainment........................... 30
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 1833.79


Assets
Cash.................................... 0
House value (Gross)..................... 135000
Shares and bonds........................ 0
Car(s).................................. 9000
Other assets............................ 0
Total Assets............................ 144000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 50000....(500)......0 currently repayment? what APR? not fixed?
Hire Purchase (HP) debt ...... 4500.....(150)......0
Total secured & HP debts...... 54500.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
A&L loan.......................6000......405.......0 what APR on all these?
Barclaycard....................6500......150.......0
debenhams......................1100......41........0
do you have an overdraft?
Total unsecured debts..........13600.....596.......-


Monthly Budget Summary
Total monthly income.................... 2,150
Expenses (including HP & secured debts). 1,802.45
Available for debt repayments........... 347.55
Monthly UNsecured debt repayments....... 596
Amount short for making debt repayments. -248.45

Personal Balance Sheet Summary
Total assets (things you own)........... 144,000
Total HP & Secured debt................. -54,500
Total Unsecured debt.................... -13,600
Net Assets.............................. 75,900

Created using the SOA calculator at www.makesenseofcards.com.
Reproduced on Moneysavingexpert with permission, using Firefox browser.[/font]

Well you are certainly a long way short of meeting your repayments. What were the debts spent on? Are you spending the shortfall on your barclay card each month? have you stopped all spending on the debenhams card? this has a very high APR and is not essential spending (cut it up even).

Because you have quite a low LTV in your mortgage then switching to interest only might be an option, although I would only do it for a short period and only if you have a very fixed plan to pay back your other debts and stick to a reasonably tight budget.
The problem I see is that you mention freeing up £400 per month, but if your shortfall is actually the £500 you originally mentioned rather than the £250 above (plus cleaner, bank charges etc) then you are still going to be struggling to meet the minimums and actually get debt free.

I would find out all the APRs and then use a snowball calculator www.whatsthecost.com to see how long it would take you to pay back the debts if you direct whatever else would be left over each month, that wouldn't be the minimums plus £400 though, due to the shortfall you currently show.
Either way I think you need to think about cutting back every cost you can from your SoA as it will certainly be tight whatever.

Hope this helps give you some things to think about.

ali-t

Thanks for your input George, the loan was a £12k loan taken over 3 years that will be paid off by next September so I don't want to go messing with that but would consider moving the barclaycard credit card to a virgin one if that would help.

I wasn't mis-sold PPI as I didn't take it out. After a stint working in retail about a decade ago I realised it was the devils tool!

ali-t

Thanks for taking the time to comment Tixy. I will go through your points in order:

I don't get overtime at work, we get time back but I do some freelance work that generates extra income although had envisaged this going to pay off the car I bought recently (before I realised how much debt I was in!).

There is no room for an extra lodger and I have considered moving to a smaller house/flat and renting mine out but I wouldn't generate much extra revenue, if any, and would be left without a garden for the dogs.

I haven't shopped around for gas/electricity recently so should do this. It is quite high for 2 people living in the house as the lodger is quite free and easy with the power and I don't feel I can ask her to be frugal due to me being in debt. she is paying a fairly substantial amount to live in the house and if I curtail it she may vote with her feet leaving me worse off.

Groceries is an area I can reduce hugely as I spend a lot on crap and takeaways etc and usually buy lots of fruit and bagged salad but don't eat it so it gets thrown out. Chances are I will lose weight and spend less money when I sort this out.

The dog training is pretty much ongoing and the dog walker is cheaper than the local competition. I would rather compromise on my own spending than on the dogs although can definitely cut back on treats, toys, new beds etc.

I haven't shopped around for mortgage cover either but will look into this. I am £21 for mortgage protection and £10 for life and critical illness cover tied into the mortgage which I think is quite good. If I add all the debts to the mortgage and have it as one bigger debt these costs will go up to reflect the higher amount owed on the mortgage but I will definitely look into the viability of reducing these payments.

Xmas is going to be a MSE effort this year and I will make the effort to go to the hairdresser less. I pay £45 for a cut but only go every 8-10 weeks so have to weigh up whether it is a false economy to get a cheaper cut but need to go more often. I think I will be wearing my hair tied back for the next few years!! At least I don't have to buy any toiletries as I have loads from my binging on expensive products days, hence some of the debt. If i lose some weight I have loads of clothes that will fit again so it will be like having a new wardrobe!

I didn't put the APR of the mortgage down as it is over 3 loans. The original one is now at 1.?% and 2 of the other loans added to it are at 4.99%. I have looked into remortgaging but the financial advisor said not to as I have such a good deal at the moment.

I don't have the APR's for the cards to hand but the debenhams one is very high (approx 28?), I think the barclaycard is about 6% and the loan is around 7%. I got payment for freelance work through last week so will put the £500 from that towards the Debenhams card and try to get that one paid off first. I don't use it much, only when there are big sales on in Debenhams or online to get discount and free postage for bargains that are usually birthday or xmas presents etc.

I don't spend on the barclaycard and rarely spend on the debenhams card but just always seem to get enough money through to prevent having to do this e.g. tax rebates, premium bonds wins, deposit from lodger, selling on ebay, freelance work etc etc.

Having re-read my post it sounds like a bunch of excuses but I am committed to getting this sorted. I earn a decent salary and it really !!!!es me off that I have less disposable income than I did when I was earning much less (the irony is not lost on me that I am now paying for that lifestyle that I lived then).

ali-t

I have started making small changes and long may it continue. I have cancelled the magazine subscriptions I have and will use my clubcard points in future for any further subscriptions so I don't have to give up luxury entirely. I have stocked up the freezer with staples and will do some cooking and freeze smaller portions. I have bought filler products (beans and pulses) to eke out the meat and have listed lots of stuff on ebay. If it all sells I will have over £100 to put towards the debts. I am going to put £500 to pay off half my debenhams card and use the ebay money to do more of the same.

I am also going to draw up a debt repayment schedule so I have a timeline of when things will get paid off which should be a good motivator for trying to pay off the debts. I am still unsure whether to try for an interest only mortgage or just aim to be more inventive with ways to generate money.

Small steps but every little helps.

Tixy

All sounds like good progress ali, maybe give it a bit longer to see if how things are going and whether you can manage without changing your mortgage? Then if after a few weeks you think you won't make up all the shortfall then you could reconsider the mortgage.