Oh No! It's a journey of £38,000 - This time it's personal.... (Now with proper SOA)

Homershairdo

Right, so here we are, Monday morning and feeling fine. Ish.

I'm looking at as many options as possible in order to reduce down debt without impacting credit ratings. I've one late payment against me in the last six years, and I know that a dmp will ruin any credit rating I currently have.

The reason for these rantings, I hear you cry - income has taken a turn for the better - for six months at least anyway - Mrs Hairdo has been offered a role in the NHS for an initial six months, with a view to "hopefully" extending, depending on whether the trial of the new ward is a success. Good news at last!!

Anyhow - I still have an issue with lots and lots of debt.

Today's question is - has anyone on this board had experience of contacting a credit card company, and asking them to close the card (which has a balance), freeze interest, but allow the minimum contracted payment? So the debt free target becomes static, rather than having interest added each month, whilst maintaining contracted payments? I assume this wouldn't affect my rating, but I could be wrong!

Any help / advice / warm wishes??!!

Thanks again!!

H

jamesd

Good to read about the extra income for a while! I'll hope that it lasts a lot longer than that.

An arrangement to freeze interest would show up as an arrangement on your credit record and have some negative effect but less than a full DMP.

For the moment I'll assume that you don't make those arrangements and that the extra income would allow about £300 a month for six months, so £1,800 to be paid off the debts. If the £2,000 is still available that would mostly clear the Virgin card and perhaps allow a balance transfer from Lloyds to them, then closing of the Lloyds account.

Paying a Pound over the minimum payments on the credit cards should help you to get more balance transfer offers, perhaps including a new card with one, that would let you close an existing card after the transfer.

From the look of it there's no immediate need to go with arrangements and you could wait until the new year when there's some reduction in amounts owed and when you find out whether you can get more 05 deals without using arrangements.

If Zopa is willing to accept token payments for a while (which will show up as an arrangement) that would let you further reduce the credit card balances and make it easier to keep those that remain at 0%. If you can get more 0% deals than you need to keep the cards at zero you can put some of that towards Zopa, which will reduce the normal monthly payment amount there and get you some more breathing room for a possible lower income.

Homershairdo

jamesd wrote: »

Good to read about the extra income for a while! I'll hope that it lasts a lot longer than that.

An arrangement to freeze interest would show up as an arrangement on your credit record and have some negative effect but less than a full DMP.

For the moment I'll assume that you don't make those arrangements and that the extra income would allow about £300 a month for six months, so £1,800 to be paid off the debts. If the £2,000 is still available that would mostly clear the Virgin card and perhaps allow a balance transfer from Lloyds to them, then closing of the Lloyds account.

Paying a Pound over the minimum payments on the credit cards should help you to get more balance transfer offers, perhaps including a new card with one, that would let you close an existing card after the transfer.

From the look of it there's no immediate need to go with arrangements and you could wait until the new year when there's some reduction in amounts owed and when you find out whether you can get more 05 deals without using arrangements.

If Zopa is willing to accept token payments for a while (which will show up as an arrangement) that would let you further reduce the credit card balances and make it easier to keep those that remain at 0%. If you can get more 0% deals than you need to keep the cards at zero you can put some of that towards Zopa, which will reduce the normal monthly payment amount there and get you some more breathing room for a possible lower income.

All good advise, and sounds like a plan!

Zopa have been in touch, and have offered a reduction to £265 a month for three months. Which, as you say, will be shown as an arrears rather than a default. Which although not great, can something I think I can live with.

So that's £100 I can put towards cards a month.

I'm going to phone MBNA, and see whether they'll accept a F&F of a low amount (wishful thinking.....). Conversely, I'll pay off £2K imediately off one of the cards, make overpayments, and do some balance transfer magic.

I'm also thinking of speaking to Mr Mortgage provider and asking them to change me to IO for a period of time. But that may be a leap too far. Although I do have 28 years left, so any capital payments can easily be made up.

saltnvinegar

Hi Homer

Just a quickie post to say well done for tackling things, it looks like you're getting to grips with stuff. I remember your first post here and you have come on a loooong way since then.

Keep positive and I hope things work out for you.

Best

SnV

jamesd

Rather than F&F try with MBNA, perhaps try applying for another MBNA-linked card that offers a 0% balance transfer deal. MBNA tend to be one of the more generous companies with such offers and credit limits so it's worth trying to keep them positive about you if you can manage it. You won't be able to BT from the Virgin card to a new one but a BT from Lloyds would ensure that you won't get their high interest rate in the new year.

The Zopa late payment will effectively bar you from getting new cards to make balance transfers to. I think it's a bad idea to accept that offer at this time, because it'll cost you far more than it saves, by forcing you to later pay interest on the credit cards. A better plan seems to be paying as much as possible off the Virgin card to reduce the credit that you have outstanding. That should increase the chance of you getting a new card at 0% but it won't show up in your credit record until a little after the billing date following the payment.

Homershairdo

Maybe I should change the title of this thread.

In light of where I currently am, and with Mrs H about to start to a new role, a dmp / arrangements route is going to be put on hold. As well as that, we'd need to sort our mortgage out at some point, and I don't want to impact on Mrs H's credit record, which at the moment is scored (I know it is a pinch of salt score) by Equifax as 999. Mine currently is a rather poor 500.

Anyhow, I'll decline Zopa's kind offer for the time being, but will contact RBS and ask for interest only for a few months. That should free up some funds to go towards the debt target....

So, that's a plan. Not much of one, but a plan none the less.

jamesd

Thinking more about the mortgage, is it currently for fewer than 25 years, or does your lender allow more than 25 years? If so, they may be willing to leave it on repayment basis but increase the term without reporting it to credit reference agencies as an arrangement. That would reduce the payments and free up some cash for reducing the more expensive borrowing, without having any negative effect on your credit report.

Homershairdo

Plan b required!!

As expected, RBS will not allow an interest only change as I do not have 75% LTV. And an increase in term will only reduce the monthly payments by about £50. So I'll be looking at more options!

Homershairdo

Option today - pay off my Tesco Card - so that'll be £1,300 gone. I'll then see whether there are any balance transfer rates available. I also got a free ipod nano (the new one) through work, so I'll be placing that up on eBay. Another £100 to the coffers!

Bonus month next payday, so that'll be another £500 from debt mountain removed. Hopefully!

Homershairdo

Now with accurate SOA!!

Statement of Affairs and Personal Balance Sheet
Household Information
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned.................... 2
Monthly Income Details
Monthly income after tax................ 2050
Partners monthly income after tax....... 975
Benefits................................ 180
Other income............................ 0
Total monthly income.................... 3205
Monthly Expense Details
Mortgage................................ 775
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 118
Electricity............................. 56
Gas..................................... 56
Oil..................................... 0
Water rates............................. 38
Telephone (land line)................... 15
Mobile phone............................ 70
TV Licence.............................. 12
Satellite/Cable TV...................... 21
Internet Services....................... 15
Groceries etc. ......................... 400
Clothing................................ 100
Petrol/diesel........................... 300
Road tax................................ 20
Car Insurance........................... 110
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 100
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 27
Contents insurance...................... 0
Life assurance ......................... 45
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 15
Entertainment........................... 100
Holiday................................. 0
Emergency fund.......................... 35
Total monthly expenses.................. 2428

Assets
Cash.................................... 1500
House value (Gross)..................... 165000
Shares and bonds........................ 0
Car(s).................................. 3500
Other assets............................ 0
Total Assets............................ 170000

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 155000...(775)......4
Total secured & HP debts...... 155000....-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
Zopa...........................15423.....355.......16.9
MBNA...........................5038......110.......19.9
LTSB...........................5828......100.......0
HSBC...........................4213......95........0
Halifax........................3256......35........0
Tesco..........................1308......28........19.9
Natwest........................2994......67........0
Total unsecured debts..........38060.....790.......-

Monthly Budget Summary
Total monthly income.................... 3,205
Expenses (including HP & secured debts). 2,428
Available for debt repayments........... 777
Monthly UNsecured debt repayments....... 790
Amount short for making debt repayments. -13
Personal Balance Sheet Summary
Total assets (things you own)........... 170,000
Total HP & Secured debt................. -155,000
Total Unsecured debt.................... -38,060
Net Assets.............................. -23,060
Created using the SOA calculator at www.makesenseofcards.com.
Reproduced on Moneysavingexpert with permission, using IE browser.