mental illness and debt mistakes

mrcow

Moneysavingslave wrote: »

I was thinking maybe by not paying off this credit card debt, and keeping a cash balance somewhere, when the day comes that I manage to get better and find a nice job, I'll be able to put £5k down on a mortgage and just bounce the credit card debt around various cards. My abbey one is useful as there are no transfer fees on it.

Don't do it.

It could be a massive mistake. Just pay the debt off.

redsquirrel80

mrcow wrote: »

Don't do it.

It could be a massive mistake. Just pay the debt off.

I would tend to agree with this, from experience, it's very easy to go down the route of getting a new card for a balance transfer, then spending more on the card because you need/ want something... etc etc.. and building up more debt. Unless you are very disciplined then I think it can be risky, and if you have already had an episode of mental illness where you spent money irresponsibly, it could well happen again.

If you have £1650 to put towards the debt, that leaves £3350 which at £300 a month will take you less than a year to pay off, so you won't have to pay interest on it. Then cancel the card to remove the temptation to spend on it again.

It's only a year, which is not a long time in the scale of your whole life, then you can think about saving up instead!

DarkConvict

Unless you have money in savings to cover the card debt incase the 0% deal cannot be obtained you are insolvent basically you owe more than you have in cash assets.

if you have an excellent credit file and savings then it does work, but for people with debt issues it is very risky and makes things work. You need to see 0% cards as a means to pay more off your debts as they are interest free rather than a means to save money for the future

Moneysavingslave

DarkConvict wrote: »

Unless you have money in savings to cover the card debt incase the 0% deal cannot be obtained you are insolvent basically you owe more than you have in cash assets.

I appreciate your comments but wouldn't that imply that the majority of people with mortgages are technically insolvent?

Moneysavingslave

redsquirrel80 wrote: »

If you have £1650 to put towards the debt, that leaves £3350 which at £300 a month will take you less than a year to pay off, so you won't have to pay interest on it. Then cancel the card to remove the temptation to spend on it again.
!

I do agree with you to a certain degree but the thing is, I've had problems with housing benefit before and if it wasn't for the cash reserves I had and a large overdraft I'd have been stuffed. Paying off the debt is a good idea but giving up the capital I have in my bank is bad for emergencies. I'd rather be shot of the debt but say there were problems with my housing benefit in the future, and I had no money in my bank account to pay my rent, this could make my life very difficult.

There was one time where it took about four months for my housing benefit to be paid for example.

Ames

Moneysavingslave wrote: »

Thank you to everyone for their advice.

Regarding paying off the debt. Although I agree paying off the debt in the long term is a good idea, I thought maybe it might be better to keep it on the credit card. Not having money in my bank account can be a risky business in itself, as if a crisis happens I have no hard capital to fall back on. Credit on plastic can just sit there. As long as it's not accrueing too much interest I'd rather have the £5k in money somewhere. Besides, by having this debt on the card I won't use it.

I was thinking maybe by not paying off this credit card debt, and keeping a cash balance somewhere, when the day comes that I manage to get better and find a nice job, I'll be able to put £5k down on a mortgage and just bounce the credit card debt around various cards. My abbey one is useful as there are no transfer fees on it.

Moneysavingslave wrote: »

I do agree with you to a certain degree but the thing is, I've had problems with housing benefit before and if it wasn't for the cash reserves I had and a large overdraft I'd have been stuffed. Paying off the debt is a good idea but giving up the capital I have in my bank is bad for emergencies. I'd rather be shot of the debt but say there were problems with my housing benefit in the future, and I had no money in my bank account to pay my rent, this could make my life very difficult.

There was one time where it took about four months for my housing benefit to be paid for example.

I do understand where you're coming from - a big chunk of my debt was built up by a housing benefit claim taking a year to get sorted. But I think you're looking at it the wrong way round.

You want to remain in debt (which is a certainty) in case something goes wrong (which might not happen). I'd say, pay off the debts. Then, if there is a problem, then you've got the credit card and overdraft to fall back on. Also, chances are by the time something happens then you'll have had time to build up some savings so things wont be as bad as they were last time.

Also, if you're on benefits, having a big chunk of money in an account is a bad thing. For a start, if it gets above 6k it'll start affecting things like your housing benefit. Secondly, it'll cut you off from emergency help. For instance, you could be entitled to a community care grant if your cooker blows up or similar, but if you have over £500 in savings you're not.

It's also very dangerous if you have a MH condition to have access to all that. Think about if it happens again. You could blow a few grand you have in savings, taking you back to where you are now, and then run up another few grand in debt (I've been there and have enough t shirts to open a boutique!) making your position even worse. If it's something that doesn't happen often then it's even worse - you'll have had more time to build up more money, and it'll come completely out of the blue so you wont be prepared and have safeguards in place.

I've fallen for the 'it's ok, I 'll move it around cards' trap, I think most people on this forum have. The banks want you to do that. Because once that first card is cleared you'll see something you 'need', and run it up again. Then they'll slap horrendous interest on it and make a fortune out of you. And as I said, you're in the position of having a fallback for real needs.

Having run up lots of debts for various reasons, I've realised that people on benefits don't need credit at all, because there are various things to avoid it. For instance, if your HB takes ages you can apply for discretionary payments (wish I'd known that at the time!), there's the social fund loan, various grants etc. And the reason that they're there is that people on benefits just can't afford to pay commercial rates of interest. It's 0% for you, but if you read these forums it wont take you long to come across plenty of stories of how quickly that leapt to unmanageable rates, even for people earning 50k a year.

Moneysavingslave

Ames wrote: »

I do understand where you're coming from - a big chunk of my debt was built up by a housing benefit claim taking a year to get sorted. But I think you're looking at it the wrong way round.

You want to remain in debt (which is a certainty) in case something goes wrong (which might not happen). I'd say, pay off the debts. Then, if there is a problem, then you've got the credit card and overdraft to fall back on. Also, chances are by the time something happens then you'll have had time to build up some savings so things wont be as bad as they were last time.

Also, if you're on benefits, having a big chunk of money in an account is a bad thing. For a start, if it gets above 6k it'll start affecting things like your housing benefit. Secondly, it'll cut you off from emergency help. For instance, you could be entitled to a community care grant if your cooker blows up or similar, but if you have over £500 in savings you're not.

It's also very dangerous if you have a MH condition to have access to all that. Think about if it happens again. You could blow a few grand you have in savings, taking you back to where you are now, and then run up another few grand in debt (I've been there and have enough t shirts to open a boutique!) making your position even worse. If it's something that doesn't happen often then it's even worse - you'll have had more time to build up more money, and it'll come completely out of the blue so you wont be prepared and have safeguards in place.

I've fallen for the 'it's ok, I 'll move it around cards' trap, I think most people on this forum have. The banks want you to do that. Because once that first card is cleared you'll see something you 'need', and run it up again. Then they'll slap horrendous interest on it and make a fortune out of you. And as I said, you're in the position of having a fallback for real needs.

Having run up lots of debts for various reasons, I've realised that people on benefits don't need credit at all, because there are various things to avoid it. For instance, if your HB takes ages you can apply for discretionary payments (wish I'd known that at the time!), there's the social fund loan, various grants etc. And the reason that they're there is that people on benefits just can't afford to pay commercial rates of interest. It's 0% for you, but if you read these forums it wont take you long to come across plenty of stories of how quickly that leapt to unmanageable rates, even for people earning 50k a year.

I agree the only thing there was a crisis that occured years ago, where I had to apply for a community care grant and it was like trying to get blood out of a stone for a measily couple of hundred quid and it was a real emergency. I believe in the ethos of the grant but I wouldn't want to rely on something like that.

Ames

I've had several community care grants and not had a problem. I think it's all down to how you word the form, and how realistic you are about prices - they go by the lowest Argos price.

climbintheladderouttadebt

I was desperate for furniture when my dd was 1 - we had a broken futon which was dangerous, a glass table (not safe, either!), a leaking fridge-freezer, a broken microwave, my bed was broken, we applied for some help, and was told they would lend us £250. I wish I'd had some savings to fall back on!

Didn't accept the loan - thought I could cope, so bought off catalogues. Am now majorly in debt as payments were so high.

I really may be missing the point here, but I don't see any harm in having the cash sat there (in the bank) IF the debt is paid off with it in the future and you run into no problems with the bank account. Mental illness MAY cause problems at any time, with the cash there or not.

But, moneysavingslave, could you have a parent look after the money for you? Have you sought advice from anywhere else? It sounds like quite a big financial decision and if there's something people advising you don;t know of, it could make a big difference.

Moneysavingslave

I really may be missing the point here, but I don't see any harm in having the cash sat there (in the bank) IF the debt is paid off with it in the future and you run into no problems with the bank account. Mental illness MAY cause problems at any time, with the cash there or not.

I agree with the sentiments expressed here that keeping large amounts of money hanging around and credit cards tempts fate a little however although I'd agree that many people with mental illness can be prone to overspending, the evidence from this board suggests that we're not the only ones. I just don't like the idea of thinking that I'm not in control of my own actions. In reality I'm not, otherwise I wouldn't be mentally ill like I am but the debt thing for me, in the whole scheme of the mental health problems that I have is low down the list. There's a side of me that doesn't like the idea of being unable to get credit because I have a mental illness.

I think maybe giving power of attorney over to a small group of people I trust may be a good idea but relinquishing control of all my finances seems abit OTT.