Student Debt, What They don't tell you!

escal8

Hi Guys need some advice.

I graduated from Uni last summer. I then got a job as a web designer for 6 months. The company made me redundant due to lack of work so I set up on my own. I have been self employed for about 8-9 months. Work is ok but the company name is getting known etc and business will pick up with time.

The problem I have is while in Uni the banks threw money at me pre-recession. So I have £5'800 worth of student overdrafts which are all getting called back in now. On top of that I have a £500 loan. So I thought I would get a loan off the bank pay them off, close the accounts and pay the loan back with my takings. The bank however approved me for the loan but due to my short trading won't give me it.

I was wondering if anyone knows a way I can get my hands on the money for a loan or a better solution as being in these overdrafts is giving me awful credit rating.

Cheers,

A

FireWyrm

The short answer....get a 'respectable' job. The banks wont touch people who are 'self employed' since the recession, as so many people...um...overestimated their income to get a mortgage. Self employment isnt for the faint hearted since there are tax implications and book keeping issues etc. My advice would be to take what you have learned in the last 9 months and sell it to an employer on the open market. I would then make a very careful budget of my wages and I would aim to be paying off that loan within the first year. Once you have done that, you'll have more than a year, probably closer to two of 'actual employment' on your CV and you would then be in a much better position to go self-employed. You would then be able to enjoy it too without worrying about paying debts and the inherently unpredictable situation you are in right now.

rdchick

Your first few lines actually made my heart skip, like looking in the mirror... I to: I graduated from Uni last summer. I then got a job as a web designer for 6 months. but I transfered positions in January to a more admin role when the work dried up.

Maybe, pop the buisness on hold for a bit and focus on getting your debt down. I am doing the same right now before plunging back into uni for a career change into nursing!!

good luck what ever you decide xxx

BigCraigJohn

Its a personal thing.
I think telling you to give up being self employed to get a loan to pay off debts is plain wrong. your career path should not be set by student loans and debt.
There is not much more you can do other than tell the banks that you are self employed and unable to borrow to pay off the debt(which wont work anyway). Tell them you need to set up a repayment plan which they will despite what you may think arrange.
They have to be reasonable with you and if you are reasonable with them you cant really do much more.
Debt consolidation is a 1 way ticket to skint.

Little_Miss_Uni-Debt

Hey escal8,

Official student debt is loans taken from the student loans company. Once you're out of uni debt is just debt, with v high interest. I know it sucks, I've been there too. This is exactly what happened to me. I had a graduate OD and a credit card, consolidated them into a small loan because I didn't budget or even look at the reasons why I spent on my OD and CC & they built up again. Consolidated several times until I could not consolidate no more. Also because of redundancy I couldn't pay a loan back so it got upto £14k before I had to find my own way out.

Half of my debt was probably interest, on top of interest from one loan going into another.

PLEASE don't try and get a loan it will only get worse. You're doing fine by setting up by yourself you just need some security.

You need some guaranteed income while your business is taking off. Factory work, bar work, anything part time.

Get a new BASIC bank account (NO overdraft or credit card even if they offer, you must insist) Get any wages going into that or else they will be swallowed when your overdraft gets reduced.

Go with a bank that you don't owe anything to or else they can just take your money. They can 'offset' what you have in your current account against debts. A bank you don't owe to will be ok. I hear the Co-op cashminder is meant to be good.

Then just treat your overdrafts as debts to pay off. Yes, it won't be interest free but that means you have to work hard to clear them. Try to come to an arrangement with the banks that they reduce them slowly, like £100 per month and then try and pay off that £100 as it goes down so you keep them within their limit.

I'm sure they'd rather have you paying some interest than chasing you for a debt that you can't pay.

Try and find a part time job so you have some security and BUDGET towards clearing your debts and don't get any more loans, credit cards etc.

Also if you budget and show the bank you're paying what you can afford then they maybe more willing to come to an arrangement than if you just go in and say I'm self employed, my wages vary each month I can't commit to anything.

Keep us updated and don't consolidate! You'd go from £6k in debt to £8k in debt just by having a loan.

If you want more detailed advice then go to http://www.makesenseofcards.com/soacalc.html fill in the template of your current income and outgoings and post up the results here.

We can then advise where to save money and how best to pay your debts off. You'll also end up with a budget you can stick to.

FireWyrm

BigCraigJohn wrote: »

I think telling you to give up being self employed to get a loan to pay off debts is plain wrong.

I never said to get a loan. I said to budget his wages from a paying job and pay off the debt in the first year. With a guaranteed income and careful budget, it should be entirely possible to achieve that. THEN he can go back to being self employed to his hearts content.

BigCraigJohn wrote: »

your career path should not be set by student loans and debt.

My lifestyle shouldnt be set by the lack of a lottery win, but it is. It's a sad fact that small businesses go under more often than not, it's incredibly hard to get started and even harder when you're shouldering a debt too. The security of a paying job would ease the burden. I'm not saying to give up the dream completely, just put it on hold until he's financially stable. The lessons he learns now with regard to budgeting will echo into the future and give him a much more positive start to his working career.

BigCraigJohn wrote: »

Tell them you need to set up a repayment plan which they will despite what you may think arrange.

Why? Why should they put themselves out. There is a way to sort this mess out quickly and cleanly.

BigCraigJohn wrote: »

Debt consolidation is a 1 way ticket to skint.

Now this I agree with.

Little_Miss_Uni-Debt

Why can't escal8 do both? Be self employed and have a PAYE job?