I am 25. How do I pay over £11000 worth of debt? Any advice greatly appreciated.

queenie_3

Hello

I am trying to work out the best way to repay my debts. I am a 25 year old male and I earn approximately £920 per month. My outgoings are as follows:

Barclaycard Loan: £175.50 (total balance £5500)
Barclaycard: £60 (minimum payment being made - total balance £3000)
Capital 1 card: £10 (min pmt being made - total balance £320)
2nd Capital 1 card: £5 (min pmt being made - total balance £70)
Topman card: £8 (min pmt being made - total balance £150)
River Island card: £15 (min pmt being made - total balance £250)
Frasercard: £14 (min pmt being made - total balance £150)
Bike repayment: £75.22 (min pmt being made - total balance £1945.25)

I have worked out that my total debt is just over £11000. As you can see, after all these payments have been made and I have paid my £150 board, out of £900 wages I am only left with about £400 a month for myself. Out of this I pay £100 towards a joint loan. This loan finishes this year and so I am just going to finish paying that off as normal.

I have been looking around and I think that the best way of repaying this would be to take out an £11000 unsecured personal loan over between 5 and 10 years. I would like the repayment to be a fixed monthly amount. That way I would know that the debt is being managed and it would give me more money a month to save and to spend on hobbies. Also, I would feel less stressed having one large loan than lots of little ones.

My main concern is that I would not be eligible for a loan because of all my debts. Also, I don't know who to go to for a loan - whether to choose a supermarket, a bank or an independent company. Also, I have heard that every time I apply for a loan and am turned down, it goes against my credit rating. I am particularly worried about this as I am hoping to consolidate this debt so that I can start saving for a deposit on a house.

I don't even know if an unsecured personal loan is the best option. I would greatly appreciate any advice on how to repay this money, which loans or companies are the best and the most reliable, and savings advice for the future. I don't want to be ripped off with huge interest charges any more. I have approximately £500 in a saving's account but I would like to leave this where it is in case of an emergency.

I have used my girlfriend's sign on and it would be her email address to which the replies should be sent. It is ***Email edited by MSE Controller2 - It is best not to post your email address on the forum. Also by not doing so, advice will be posted here for everyone else to see.***

Thanks in advance for your help
Ian

JasonW_2

My first advice would be to get the store cards cleared off. Even transferring the balances to CCs would be a good start if you have any available credit - what are the credit limits on your cards? Also what APR is on each card?

From what you have said, you still have some £300 left? Whats that being used for? People will be able to help better if you can account for every last £1. It probably feels like a total invasion, but people can help better thats all. If there are things you dont want to say what theyre for, then just give an amount.

Im in the same process are you and can finally see a way through it. I have made great progess recently just by writing to both credit card lenders and have got them to lower the APR. Ive been with them for 6 years and havent missed any payments in the last 4. If that sounds like you, then it is worth a try.

JW

JasonW_2

The only thing about one big loan is getting one in the first place. On your income, with your existing commitments you might get refused, or get offered a higher APR. You would stand more chance if you could clear, close and CANCEL the 3 store cards and the CC with £70 on it. That way, the temptation to keep using them is taken away, lenders see you have less available credit, and it will help your credit score by showing settled accounts. Plus, it will leave the amounts you are currently paying free to put towards the loan, or higher payments to each lender.

edit: Forget the savings, you need to clear off some of the debt. Use the £500 to get the store cards cleared off as much as possible.

JW

Woby_Tide

queenie wrote:

, out of £900 wages I am only left with about £400 a month for myself.

Blimey, I wish had that much left over each month to spend on myself!!! I'd start using a chunk of that to pay towards some of the debts so you aren't just paying the minimum. Foregoing some of your lifestyle now will have it's benefits longer term

Martinslovechild

Agreed. I would suggest £50 per week is generous plus maybe £25/week for petrol. This totals £300 per month leaving you with £100 per month to hammer the loans down by another £1200 per year.

Don't want to over generalise, but do you have a mobile phone? This for me would be the first thing to cancel. I never needed one when I was 25 (and to be honest, I could quite happily do without one now too!).

The previous poster is correct. Put your life on hold for a little while and you'll be much happier in the longer term.

Reaper

All sounds good advice. I'd just like to stress though you shouldn't be buying things on store cards. Those River Island and Frasercard cards charge you a fraction under 30% APR. That's extortionate and you will struggle to ever pay them off with minimum payments.

First make a list of the APR for each card, it may surprise you. Look at the cheapest one and see if there is space on it to balance transfer debts from the expensive ones. Better still get a 0% credit card if you can, such as Virgin, and move as much expensive debt onto that as possible to give you a breathing space.

Then start paying extra beyond the minimum amounts, starting with the card you have left with the highest APR.

I also suggest you read Martin's articles Where to start with problem debts?, The Credit Card Shuffle and Danger! Avoid Minimum Repayments

deemy2004

Woby_Tide wrote:

Blimey, I wish had that much left over each month to spend on myself!!! I'd start using a chunk of that to pay towards some of the debts so you aren't just paying the minimum. Foregoing some of your lifestyle now will have it's benefits longer term

According to his post, he actually has £300 left for living off i.e. food, clothes, travel, subsistence or about £69 per week.

Thus I advice you start keeping a spending diary so as you can see where your £69 per week is going and try to make cut backs towards say £44 per week, and use that extra £25 to pay down your debt.

Debt_Free_Chick

I have been looking around and I think that the best way of repaying this would be to take out an £11000 unsecured personal loan over between 5 and 10 years.

No, no no!!!

Using your current repayments and total debt, the debt amounts to only 31 months of repayments. Why would you want to paying off that debt over 60 or 120 months instead?

You need to snowball. Make 4 columns on a piece of paper (or spreadsheet)

Col 1 = Card
Col 2 = Min Repayment
Col 3 = Total Debt
Col 4 = APR

Put them in order, with the highest APR at the top. Then, pay the minimum amount off all of them and chuck all your surplus at the first card, the one with the highest APR. When that's finished, repeat ... min payments to all, all surplus to the one at the top. If you do this and DON'T put any more on the cards, I reckon you'll be done after about 4 years. Put the numbers in here, if it helps

https://www.whatsthecost.com

Of course, if you can first shuffle by putting the debt from the card with the highest APR on to one of the lower ones, that's even better.

You'll need to knuckle down and resist the temptation to buy "stuff". With all that debt, you must have enough "stuff" by now

ms_london

Hi Queenie and welcome to the boards.

As a 24 year old, whose debts were once as high as £19,000 (and now stand at approx £8489.00) I completely understand how you must be feeling. I wanted a consolidation loan, but with hindsight I am thankful that I wasnt given one (noone would touch me with my credit rating), so I set about repaying my individual creditors & knocking them off the list one by one - by doing it this way I have had to completely rethink the value of money, change my spending habits - and the lessons I have learnt, and am still learning will be with my for life. If Idve have been given a consolidation Loan I suspect that I would be in a worse position that I am now & probably run up the credit cards again!!!

You say that out of your wages you are only left with £400 for yourself - I know someone else said this too, but wow, I wish I had that much to spend on me each month. I have a strict budget of £50.00 per week, thats for food & some kind of a social life (and thats with doing two jobs), so you're not in too bad a position.

I think I might be repeating the other advice that has been given so bear with me.

You say you have £500 in savings, if i were you I would use this to clear the River Island Card (I had one too!!), Fraser Card (another store card with extortionate interest, think 30%), the Topman Card (again a high APR), then add £50 from your next payday and thats three creditors cleared already. Voila!!! I can understand why you wouldnt want to touch your savings, but when you are paying around 30% interest on these three cards, time is money!!!

Next I would suggest you clear The 2nd Capital One Card (balance £70)- once this is clear, what is the APR? - if it was low you could always do a balance transfer from another card to reduce the interest you are paying. I would suggest that you post a list of your cards with their APRs next to them.

For March could you not have a strict budgeting month, use £500, and then add a £120 from your March wages and you could have paid off 4 creditors. It means living tight for a month, but if you are living at home (I assume you are) you wouldnt have to pay out for much aside from your social money. Are you living at home with your parents? Do they know your situation? Could they let you off paying your board money for a few months on the condition that it would go into your debts? The £150 a month would go a long way, Capital One Card No 1 - could be paid off in just over 2 months (£320) - then that would be 5 creditors gone, leaving you with:

Barclaycard Loan - £175.50 (£5500)
Barclaycard - £60.00 (£3000)
Bike Repayment - £75.22 (£1945.25)

Unless the Barclaycard is an offer, the APR will be around 18.8%, so I would attack this card next. If you are not living at home, therefore not being able to get out of paying the £150 a month, that will still only leave you with 4 creditors (the above and Capital One Card No 1) - completely dooable, and better off already.

Could you get a 2nd job? Increase your income & throw all of this extra income into your creditors, not even spend it, but throw it all at the Barclaycard? You will be amazed at how quickly it would clear them all, even if you were only doing it for 6 months.

These are just my suggestions, I hope that are of some help & if anything you should feel positive that there is a way out & there are options, it just takes a bit of perseverance and hard work, but £11000 could be paid off within 2 years if you really wanted to (my debt will be paid off in December this year, but thats because I am paying £900 a month back at the moment!!!!)

Have a good weekend and let us know how things are going.

Ms_London

funkymonkey

its so nice to see some sound advice here and i agree with all of it - do not get a
consolidation loan, i know that seems the easiest way at the moment but most people on here dont have £300 a month for themselves - me and my partner are living on £200 a month and that includes petrol and food!

use the website given above (whatsthecost) and use their snowball calculator - it wil show you what you should pay off first - also if you put in more that your minimum payments at the moment in the top box it will show you how long it will take to pay off. an exta fiver a month can reduce your interest by hundereds and reduce the time it takes dramatically

westernpromise

queenie wrote:

I have approximately £500 in a saving's account but I would like to leave this where it is in case of an emergency.

Ian mate - this is an emergency! You're eleven grand adrift here!

Seriously. You have £500 on deposit on the off-chance you might need it, and meanwhile you're paying probably 30% interest on store card debt of less than that amount.

Your "savings" are thus not your savings at all - they're debt. You are borrowing that money at 30%, you are not saving it.

Use it. This is that rainy day.