Can Someone Give Me Some Constructive Guidance Regarding My Increasing Debt?

jigga2004

Hi guys,

I figured this was the best place to come regarding my debts which are beginning to mount up.. I am beginning to get worried because I have been stuck in my overdraft which is 3,700 for the past 4 years. Infact, I use around 3,650 of that overdraft each month.

I have never considered taking charge of this until a work colleague suggested it might be cheaper to get a loan to pay off all the mini loans I have and just have the one loan instead.

Just to break it down to you, here are my monthly outgoings/debts (approx)

1. £62 a month overdraft charge: for overdraft charge of £3,700
2. £39 a month loan charge: 3 years left to repay
3. 62 a month loan charge: 2 years left to repay
4. 35 a month charge for a laptop i brought: 3 years left to repay
5. 40 a month for t mobile mobile: 12 months left to repay
6. 15 a month for another loan payment: 2 years left to repay


The overdraft is 3,700

In total, I am paying approx £253 a month.

I am losing count of all these outgoings and I my aim is to:

1. Look for a cheaper option to pay off the debt
2. Get rid of my overdraft
3. Pay off most of the loans

However, I have no experience in organizing my money. I know, its stupid. I have also failed to take into account my mortgage monthly repayments which comes to £270 a month as I am going halves with my father.

I am 27 and some of my bad buying decisions are starting to catch up with me and its beginning to stress me out.

Does anyone have any suggestions at all? Your help is most welcome!

Cheers
Dal

Hannah_10

Consolidation sounds like a great idea. It isn't. You are now looking at the screen sideways I expect, thinking what could possibly be wrong with it. Most people after consolidating end up getting further into debt not further out of it. It's easy to think yeah well they must just have been the indisciplined ones, but actually when you look at it, very few people request a consolidation loan because they are disinterested, they request it because they want to get OUT of debt. So how come they're all going wrong?

Because of what consolidation doesn't do. It doesn't address what led you to be in debt to start with. You might think "well it was when Dad got ill and I had to take 2 weeks off work, and then I needed a new fridge..." that's masking it. The real problem is in your spending. I know that's hard to take in, but it's the truth. You have, for xx years, spent more than you have had coming in and if you don't change the way you live you'll fall back into that lifestyle again fairly soon. Not usually in the first year, but usually before you've repayed the new loan.

If you want a quick fix with a feel good factor and you don't actually want a proper, reliable long term solution then a consolidation loan offers just that. If you do want not to be still on this treadmill 10 years from now you need to make major changes, far closer to the roots than you think. We can help, if you want us to. Post your SOA (see this) and we can help you start to unravel what the root of the issue is, for a permenant change.

jigga2004

Thanks so much Hannah. I am going to take you up on that offer.

In terms of the debt thats mounted up. I made bad decisions a few years back and have since struggled. However over the past couple of years I have been austere. Or maybe not? I mean, the only thing I spend my money on is food for home and work.

But going out and all the other luxuries are very rare. I have been in this routine forever and I am focused on being in control of my living habits which is what obviously put me in sh*t in the first place.

jigga2004

Hey Hannah, Although its taken me a while, I finally bit the bullet and used the soa calculator, below is what it came out with!



Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 0
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 950
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 107
Total monthly income.................... 1057

Monthly Expense Details
Mortgage................................ 280
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 93.67
Electricity............................. 33
Gas..................................... 0
Oil..................................... 0
Water rates............................. 36.19
Telephone (land line)................... 20
Mobile phone............................ 40.42
TV Licence.............................. 0
Satellite/Cable TV...................... 20
Internet Services....................... 20
Groceries etc. ......................... 66.41
Clothing................................ 0
Petrol/diesel........................... 60
Road tax................................ 20
Car Insurance........................... 79
Car maintenance (including MOT)......... 0
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..................... 0
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 3
Entertainment........................... 25
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 796.69


Assets
Cash.................................... 0
House value (Gross)..................... 100000
Shares and bonds........................ 0
Car(s).................................. 600
Other assets............................ 0
Total Assets............................ 100600


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 22500....(280)......3.05
Total secured & HP debts...... 22500.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
co op loan.....................2300......62.19.....19.2
abbey loan.....................1874......39.05.....7.9
apple mac loan.................1390......36........19.09
mobile phone contract..........480.......40........0
overdraft .....................600.......30........0
overdraft......................3700......62.19.....0
compaq pc world loan ..........300.......0.........24.09
Total unsecured debts..........10644.....269.43....-


Monthly Budget Summary
Total monthly income.................... 1,057
Expenses (including HP & secured debts). 796.69
Available for debt repayments........... 260.31
Monthly UNsecured debt repayments....... 269.43
Amount short for making debt repayments. -9.12

Personal Balance Sheet Summary
Total assets (things you own)........... 100,600
Total HP & Secured debt................. -22,500
Total Unsecured debt.................... -10,644
Net Assets.............................. 67,456

Created using the SOA calculator at
Reproduced on Moneysavingexpert with permission, using other browser.[/font


Now, I am so keen to get rid of my debts brought about by loans and overdrafts.. These come out to approx £10,644 worth of debt. I have calculated that these unsecured debts work out to a £285 total amount.

I have broken down the amounts to the length of time remaining on the unsecured debt as well as interest... You can see the time left in the final column


Description....................Debt......Monthly...APR.....Time Left to pay
co op loan.....................2300......62.19.....19.2......4 years
abbey loan.....................1874......39.05.....7.9.......5 years
apple mac loan.................1390......36........19.09....3 years
mobile phone contract..........480.......40........0........1 year
overdraft .....................600.......30........0..............
overdraft......................3700......62.19.....0
compaq pc world loan ..........300.......0.........24.09..17 months

Total unsecured debts..........10644.....269.43....-

So now, as you can see, I am paying approx £285 a month for my £10,644 worth of debt...

My aim is to reduce the monthly payments if possible whilst decreasing the length of time it will take to pay it off. If this isn't possible, I would at least like to see if it is possible to consolidate that amount with a cheaper rate.. I am determined to take control of the debt so I can manage monthly payments and be aware of my debt from now on..

What do you suggest guys?

TUS

One quick thing - you have mobile phone on there twice. You only need it on this line:

Mobile phone............................ 40.42

Remove it from unsecured debts, as although it is a 12 month contract it is not classed as an unsecured loan as such.

TUS

jigga2004 wrote: »

Hey Hannah, Although its taken me a while, I finally bit the bullet and used the soa calculator, below is what it came out with!



Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2 You mention 2 adults so I assume you live with your partner. Yet, you share the mortgage with your father and not your partner? Does he contribute at all to this and can he?
Number of children in household......... 0
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 950
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 107What is this, and have you checked if you can claim Working Tax Credits?
Total monthly income.................... 1057

Monthly Expense Details
Mortgage................................ 280
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 93.67
Electricity............................. 33 Have you checked this is the cheapest via a comparison site?
Gas..................................... 0 How is this paid?
Oil..................................... 0
Water rates............................. 36.19
Telephone (land line)................... 20 This is more than just line rental - why is it needed if you have a mobile?
Mobile phone............................ 40.42 Seems very high, especially as you are paying for a land line. Do you need both?
TV Licence.............................. 0 How is this paid?
Satellite/Cable TV...................... 20 Get rid of this, use freeview. Needs must.
Internet Services....................... 20
Groceries etc. ......................... 66.41 Is this for 2 people for 1 month? And include all home and work meals? If so, you're doing well.
Clothing................................ 0
Petrol/diesel........................... 60
Road tax................................ 20
Car Insurance........................... 79 Seems high - again, have you checked comparison sites or haggled at renewal time?
Car maintenance (including MOT)......... 0 You need to factor in MOT at minimum here. As you car is worth £600 also factor in other run of the mill repairs such as tyres, brakes, oil change, etc.
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..................... 0 You own your property, but have no insurance?
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0 Be realistic on this one.
Haircuts................................ 3
Entertainment........................... 25 I know it's hard, but can this be cut out?
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 796.69


Assets
Cash.................................... 0
House value (Gross)..................... 100000
Shares and bonds........................ 0
Car(s).................................. 600
Other assets............................ 0
Total Assets............................ 100600


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 22500....(280)......3.05
Total secured & HP debts...... 22500.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
co op loan.....................2300......62.19.....19.2
abbey loan.....................1874......39.05.....7.9
apple mac loan.................1390......36........19.09
mobile phone contract..........480.......40........0 remove this from here
overdraft .....................600.......30........0
overdraft......................3700......62.19.....0
compaq pc world loan ..........300.......0.........24.09
Total unsecured debts..........10644.....269.43....-


Monthly Budget Summary
Total monthly income.................... 1,057
Expenses (including HP & secured debts). 796.69
Available for debt repayments........... 260.31
Monthly UNsecured debt repayments....... 269.43
Amount short for making debt repayments. -9.12

Personal Balance Sheet Summary
Total assets (things you own)........... 100,600
Total HP & Secured debt................. -22,500
Total Unsecured debt.................... -10,644
Net Assets.............................. 67,456

Created using the SOA calculator at
Reproduced on Moneysavingexpert with permission, using other browser.[/font


Now, I am so keen to get rid of my debts brought about by loans and overdrafts.. These come out to approx £10,644 worth of debt. I have calculated that these unsecured debts work out to a £285 total amount.

I have broken down the amounts to the length of time remaining on the unsecured debt as well as interest... You can see the time left in the final column


Description....................Debt......Monthly...APR.....Time Left to pay
co op loan.....................2300......62.19.....19.2......4 years
abbey loan.....................1874......39.05.....7.9.......5 years
apple mac loan.................1390......36........19.09....3 years
mobile phone contract..........480.......40........0........1 year
overdraft .....................600.......30........0..............
overdraft......................3700......62.19.....0
compaq pc world loan ..........300.......0.........24.09..17 months

Total unsecured debts..........10644.....269.43....-

So now, as you can see, I am paying approx £285 a month for my £10,644 worth of debt...

My aim is to reduce the monthly payments if possible whilst decreasing the length of time it will take to pay it off. If this isn't possible, I would at least like to see if it is possible to consolidate that amount with a cheaper rate.. I am determined to take control of the debt so I can manage monthly payments and be aware of my debt from now on..

What do you suggest guys?

I've made comments in red above. You need to tinker the figures and re-run the SOA. If you have a positive surplus after doing this, then move on to working out a snowballing plan for clearing your debts.

Use this: http://www.makesenseofcards.com/snowcalc.html (it uses the info from your SOA calc)

DO NOT get another loan to consolidate, seriously. I believe you can struggle through this and pay your debts without doing that.

KPR11

Well done on taking steps to becoming debt free.

As Hannah said, consolidation is generally a bad move.

A couple of things from the SOA that stood out for me:

jigga2004 wrote: »

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 0
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 950
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 107
Total monthly income.................... 1057

Monthly Expense Details
Mortgage................................ 280
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 93.67 - are you responsible for paying the full CT?
Electricity............................. 33 - check that you are on the best tarriff
Gas..................................... 0
Oil..................................... 0
Water rates............................. 36.19 - check that you are on the best tarriff
Telephone (land line)................... 20 - look into getting a combined phone/broadband package
Mobile phone............................ 40.42 - can you drop a tarriff? or get rid of an add on like browsing bolt on etc?
TV Licence.............................. 0
Satellite/Cable TV...................... 20 - can you switch to freesat for now?
Internet Services....................... 20 - look into getting a combined phone/broadband package
Groceries etc. ......................... 66.41
Clothing................................ 0
Petrol/diesel........................... 60
Road tax................................ 20
Car Insurance........................... 79 - use price comparison sites and cashback sites when up for renewal
Car maintenance (including MOT)......... 0
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..................... 0
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 3
Entertainment........................... 25
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 796.69


Assets
Cash.................................... 0
House value (Gross)..................... 100000
Shares and bonds........................ 0
Car(s).................................. 600
Other assets............................ 0
Total Assets............................ 100600


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 22500....(280)......3.05
Total secured & HP debts...... 22500.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
co op loan.....................2300......62.19.....19.2
abbey loan.....................1874......39.05.....7.9
apple mac loan.................1390......36........19.09
mobile phone contract..........480.......40........0 - isn't this double counting? or are you in arrears?
overdraft .....................600.......30........0
overdraft......................3700......62.19.....0
compaq pc world loan ..........300.......0.........24.09 - is this the same loan that you mentioned paying £35pm towards? If you are paying £35pm for 3years to cover a £300 debt, you need to seriously look into paying it off early.
Total unsecured debts..........10644.....269.43....-


Monthly Budget Summary
Total monthly income.................... 1,057
Expenses (including HP & secured debts). 796.69
Available for debt repayments........... 260.31
Monthly UNsecured debt repayments....... 269.43
Amount short for making debt repayments. -9.12 - this is why you are not making any progress, you are spending more than you earn. The only way out is either you cut your spending or increase your income. Can you get overtime, or find a part-time job to help?

Personal Balance Sheet Summary
Total assets (things you own)........... 100,600
Total HP & Secured debt................. -22,500
Total Unsecured debt.................... -10,644
Net Assets.............................. 67,456

Created using the SOA calculator at
Reproduced on Moneysavingexpert with permission, using other browser.[/font


Now, I am so keen to get rid of my debts brought about by loans and overdrafts.. These come out to approx £10,644 worth of debt. I have calculated that these unsecured debts work out to a £285 total amount.

I have broken down the amounts to the length of time remaining on the unsecured debt as well as interest... You can see the time left in the final column


Description....................Debt......Monthly...APR.....Time Left to pay
co op loan.....................2300......62.19.....19.2......4 years
abbey loan.....................1874......39.05.....7.9.......5 years
apple mac loan.................1390......36........19.09....3 years
mobile phone contract..........480.......40........0........1 year
overdraft .....................600.......30........0..............
overdraft......................3700......62.19.....0
compaq pc world loan ..........300.......0.........24.09..17 months

Total unsecured debts..........10644.....269.43....-

So now, as you can see, I am paying approx £285 a month for my £10,644 worth of debt...

My aim is to reduce the monthly payments if possible whilst decreasing the length of time it will take to pay it off. If this isn't possible, I would at least like to see if it is possible to consolidate that amount with a cheaper rate.. I am determined to take control of the debt so I can manage monthly payments and be aware of my debt from now on..

What do you suggest guys?

I have made some comments above, hope it helps.

Good luck

KPR11

Seems like TUS beat me to it.

Also wanted to add that wherever possible always pay more than the minimum, even if it doesn't seem much. This(http://www.moneysavingexpert.com/cards/minimum-repayments-credit-card#calc) will highlight the dangers of minimum payment

WastingMyTime

I am trying not to hijack the posting but I have a question about not consolidating some of her/his loans. On the surface, it sounds a good option to pay off the loans that have a high interest rate of 19.2%, 19.09%, 24.09% with a loan -say by extending her Abbey loan that is 7.9%. Will it not save money on interest and if they put the money they currently put towards all loans towards the cheaper loan, the loan can be paid earlier than 5years. They sound determined enough to get themselves out of debt and they will manage a consolidation debt.

Your insights about the pitfalls of consolidating debts will be welcome. Please note that I will not respond to the answers as I would not want the posting to go off topic too much. Many thanks in advance though.

TUS

WastingMyTime wrote: »

I am trying not to hijack the posting but I have a question about not consolidating some of her/his loans. On the surface, it sounds a good option to pay off the loans that have a high interest rate of 19.2%, 19.09%, 24.09% with a loan -say by extending her Abbey loan that is 7.9%. Will it not save money on interest and if they put the money they currently put towards all loans towards the cheaper loan, the loan can be paid earlier than 5years. They sound determined enough to get themselves out of debt and they will manage a consolidation debt.

Your insights about the pitfalls of consolidating debts will be welcome. Please note that I will not respond to the answers as I would not want the posting to go off topic too much. Many thanks in advance though.

The rule of thumb is that consolidation loans often don't work as people either don't pay off what they are meant to be consolidating ... or don't close credit accounts and rack the debt back up again.

In addition - lenders don't consider it to be a consolidation loan, but an additional loan. So people with high debts will rarely get the size loan they require at a good rate to make it a viable option.

Finally - the whole point of this forum is to be debt free. Why extend the term of your debt for the convenience of 1 single payment ... when you can work harder to pay the debts you already have and learn a valuable lesson in the process?

On the face of it consolidation sounds great, but it really really isn't.

KPR11

WastingMyTime wrote: »

I am trying not to hijack the posting but I have a question about not consolidating some of her/his loans. On the surface, it sounds a good option to pay off the loans that have a high interest rate of 19.2%, 19.09%, 24.09% with a loan -say by extending her Abbey loan that is 7.9%. Will it not save money on interest and if they put the money they currently put towards all loans towards the cheaper loan, the loan can be paid earlier than 5years. They sound determined enough to get themselves out of debt and they will manage a consolidation debt.

Your insights about the pitfalls of consolidating debts will be welcome. Please note that I will not respond to the answers as I would not want the posting to go off topic too much. Many thanks in advance though.

You will have differing views on consolidation on this board. My view, as stated in my previous post is that consolidation is generally a bad move.

There are few instances where consolidation is great option provided (in no particular order, all need to be addressed IMHO):
1. It is not converting unsecured loans into secured loans
2. The root cause of the debt is addressed - the consolidator has addressed overspending, gambling or whatever it is that caused the debt in the first place,
3. The aim of the consolidation is to secure a better interest rate but beware of the following situation the MSE Guru highlights:

"Yet to do this, consolidation loans stretch your borrowing over a longer period, maybe 15, 20 or even 25 years and that means the amount you pay back is going to be huge. A £10,000 loan on a high street credit card at a horrid 18% APR costs £5,240 paid off in five years, many think shifting it to a considation loan at half the rate 9% is cheaper, but as its spread over 25 years, the actual cost is £15,200 which is nearly three times more."

4. The consolidator has not got access to further funds and is disciplined enough not to seek further funds.

There are very few instances where consolidation works, and as TUS said "people with high debts will rarely get the size loan they require at a good rate to make it a viable option". A better option in my view, and it's what MSE Guru says as well, is

"if you have a lot of small loans or credit cards with debts on, the primary aim should be to pay them off as quickly as you can at the lowest possible rate."

so use things like the snowball calculator and make sure you are paying more than the minimum, this will save you tons (at least relatively) and also free up cash quickly which you can use towards the larger / longer debts.

I have not personally consolidated so my views may be a bit naive. I am sure other more experienced people will correct me if I am mistaken and give helpful advice.