£100k on Cards - Consolidation??

NeedaPaddle

Hi Everyone

We have £100k debt on various cards - we have managed to keep the figure from getting any bigger so it is not increasing at the moment. We have no other debts in terms of loans but we do have a mortgage. The apr's on the cards range from 3.9% to about 19%

We have looked into iva's, debt plans etc but would prefer not to go that route if possible. I am self employed so IVA's etc seem to become a little vague when you are not on fixed income.

We probably have £70k equity in the house so if we sold up, we would be £30k down and that would be more manageable but we reallly do not want to do this.

We have not defaulted on any debts so there are no red flags on our credit rating.

Our ideal situation is this: remortgage the house as much as we can. This would probably allow us to load £50k onto the mortgage - then we would need to get the other £50k on loans (if possible). The problem we have is finding a way to do that - ideally, I would like to go to a lender and say - ok, we need £100k to consolidate our debts - this is our position - can you help? Is this what financial advisers do?? I spoke to CCCS about a year ago when things were worse (£120k down) and got a lot of good information.

I know that credit card debts are unsecured etc and that in effect, we could do a payment plan but it's not like we want to run away from the debt and get away with it - we made the debt - so we need to pay the debt. The other offputting aspect of payment plans etc is that there appears to be no hard and fast rule as to whether the card companies will hit us for charges and the debt then really flies out of control. Another issue is that if we did an IVA we could also have problems as a) I am self employed and b) as I understand it, they can decide to make us bankrupt, - forcing us to sell the house which we dont want even want to risk.

If we could consolidate the debt into a long term sensible interest rate loan, we believe we could manage it and bring it down. Right now, were managing to maintain payments but the pressure every month is getting a litle crazy.

Any thoughts....

deliciosa

Hi,

I'm no expert but I think the best thing would be if you posted a full SOA, including your cards, the APR and every info that you might be able to get hold of, and also your incomings and outgoings - then all these smart people will be able to help.

Good luck!

x

Gemmzie

Consolidation is generally a bad idea. As the temptation to spend again is still there. It doesn't address your spending habits.

Maybe as you are self-employed, a DMP might be of some use?

We need to see a statement of accounts (SOA) to advise you further

hypno06

Hi, and welcome.

I know where you are coming from because we had £100k on CCs etc and I am self employed so know the difficulties it entails.

But, I would say that to consolidate could be the biggest mistake you make. I have consolidated 3 times but each time just got myself into more and more debt. Of course, each time was the "last" time.....

Two things I would suggest are:

Put your full SOA on here and let us see how we can help with your cash flow.

Play with the snowball calculator at https://www.whatsthecost.com and this will give you some really good ideas as to how you can make a move in the right direction.

Good luck and keep posting.

shameless-about-money

First of all an IVA would not be impossible being self-employed but for a debt of £100K you are looking at a monthly repayment of around £640, plus a lump sum payment at the end of year four since you have a lot of equity in your house. The IVA company would take your last five years of accounts, along with a projected forecast and come to a figure. That figure might end up not being high enough for you to pay £640 per month, though.

A DMP would take you forever to pay off.

Bankruptcy you would lose your house.

I would never recommend a loan to consolidate.

Your best bet would be to sell your house to something smaller and cheaper, pay off as much of your debt as physically possible and throw as much money as possible to get rid of the rest. And deal with your cashflow, as already suggested.

NeedaPaddle

Thanks for the replies.

On cashflow: Reduction of monthly expenditure would admittedly give us some extra cash - maybe £300-£400 per month saved. We have been collecting our receipts etc over the past month. I will try and get all this together and post - along with card debts, aprs etc.

The killer is the amount we are paying per month to the card companies - probably between £2k and £3k per month.

The reason for the debt is that we had a business fail 18 months ago - leaving us under by £120k. We are not spending excessively. The debt rose owing to us using the cards to live on - I know - not good - as until the last 6 months, we have not been earning enough to cover cards and living costs.

We cant seem to see a way out of this apart from debt consolidation. If we go for an IVR, they will probably assess that we cannot afford the £640 estimate that has been mentioned as it is only now that we can afford this - but historically, it wont look good on my company accounts. So an IVA would put our house at risk.

A DMP is possible but is a DMP more likely to work out as more expensive if the alternative was a loan with lower interest? It's a big debt for a DMP.

If we could consolidate the loan, we feel that we could make the payments reasonably well - the monthly repayments on 100k would be unlikely to cost more than £900 (if we could get it over a long enough period) and that seems a whole lot better to the monthly repayments we are paying now.

NeedaPaddle

More Questions....

If we did a DMP, are the card companies able to refuse the offer, raise the interest rates and load on the charges - has anyone any experience of this??

chevalier

Okay first thing is that if you can't afford the card payments, would you be able to afford the loan repayments either? Also if you look at https://www.whatsthecost.co.uk, you can work out just how much interest you would pay over the longer term of the loan. Just because the monthly repayment is lower, does not mean that you won't pay out literally £1000's in extra interest.
Secondly if you secured any of this on your house and then couldn't pay, then you would lose the house anyway.
Thirdly if you talk to payplan or CCCs (links at the top of the page), they are FREE and impartial, and will suggest the best way to go.

Other than that, is there any spare room on any of the credit cards so that you could balance transfer the most expensive (19%) onto the least expensive? This would save you a large amount in interest.

With a DMP, someone like CCCS or Payplan, will work out a budget with you, that covers your essential spends. These are mortgage, heating, food, other utilities. Then whatever is left is split between your creditors. USUALLY (but not always to be fair) if one of the above 2 companies is dealing with your debt, then companies will freeze interest/stop charges or both.

If you post your statment of affairs (see southernscousers sticky at the top of the forum), then there may be areas where you can trim your spending.

best of luck
chev

MIVAA

Hi NeedaPaddle,

Having read your posts quite carefully, it may be there is an option available to you that you haven't considered, or don't even know about.

It's called a the Lump Sum IVA, which is also known as a Full And Final Settlement IVA.

I don't know whether your circumstances will fit because we don't have the full details here, but it's definitely worth considering.

In principle it consists of a one-off payment that you offer to your creditors with money raised from a re-mortgage.

All the normal protection that an IVA offers will still be there, but the IVA only lasts for 1 payment, so you'll be debt free immediately.

Read this article that I wrote on this subject, then put it to Payplan when you speak to them, they'll be able to let you know if the figures work out in favour of a F & F.

Don't forget, get a second opinion if you aren't sure too.

You'll find it at this link below.

The Lump Sum IVA: A Full And Final Settlement

I hope this helps.

shameless-about-money

A F&F is fine but they must do a remortgage first and have the cash in hand ready to pay.

A minimum of about 40% would be required, so £40K plus £2K IP fees.

NeedaPaddle

Thanks for the replies re Lump Sum IVA - my wife and I had resigned ourselves to selling the house and attempting a lump sum IVA or going bankrupt instead.

The idea of using the money from a remortgage for the lump sum is not something that came into our minds. We could probably remortgage and get 45k-50k out in equity. The biggest problem is that we would need a guarantor I expect.

We have always done full self cert mortgages in the past (me being self employed) - I think I would be pushing my luck to talk up my income to get a high enough remortgage to get the needed equity. Projected earnings are optimistic but past couple of years will not look good if I presented accounts.

I read the link you (MIVAA) supplied and we do seem to fit the lump sum IVA option. I will run it by the CCCS.