Some advice please?

cleggy88 · 2 July 2012 at 9:34PM

Bit a long story so please bear with me!

I started a new job about 5 months ago, my first job on monthly pay as opposed to weekly. I started it after only being back at work for a few weeks due to breaking my collarbone (had been on SSP). Basically I didn't have enough money to last the month in lieu so had to take out a payday loan to cover me until my first pay day. This left me down when I did get paid so had to get another loan to cover me again. I'm now stuck in a loop of needing payday loans to cover me throughout the month.

I haven't missed any payments on anything yet but it really is only a matter of time and I'm going to really struggle this month.

I'm just wondering what my best options would be for getting back on track?

I'm 23, currently earning 17k but as a junior. I should be earning somewhere around the 25-30k mark inside 2 years. After rent, bills and food I would usually have around £400 in disposable income a month but this is currently being swallowed up. I have one credit card which is currently at £1200 (used a fair bit of this while on SSP and haven't had any opportunity to pay it back yet).

I tried last week to get a loan through Zopa, my plan was to pay off the credit card completely and cut the limit down to £400-£500 (just so that I have it in case of emergency) and have enough left to get me through this month without a loan and pay off some extra bills I've had this month (private hospital consultation). Unfortunately I was declined.

I've signed up to Equifax and paid for my credit score (400). Lost points for not being signed up on the electoral roll for more than 3 years and for 3 late payments early last year. Everything else (phone, credit card, internet etc..) is all up-to-date with no missed payments.

I'm not sure where to go from here? I don't want to apply for another loan if I'm likely to get refused as I'm aware this doesn't look good on your credit report but I need to find a way out of the loop I've got myself stuck in. Is it worth me visiting my bank and speaking to someone there about a loan? Especially as I'm in a situation where my income will steadily increase over the next 2 years?

Thanks in advance for any advice, I really appreciate it

[Deleted User] · 2 July 2012 at 10:16PM

Not sure if it is the right answer, but can you get an overdraft from your bank. The interest rate/charge is definitely going to be cheaper than a payday loan.

Are you a recent graduate? Some banks offer graduate bank accounts, including free overdraft facilities? Not sure what bank you are with.

Is there an option to extend your CC balance - again, not ideal, but again it's going to be cheaper than payday loan.

Do you have anything that you can sell? Gumtree? Amazon? E-bay?

sickasachip13 · 2 July 2012 at 10:22PM

Hi,

I wouldn't generally recommend accumulating more debt to 'deal' with debt, but PDLs are so expensive I guess I somewhat agree with Domino, certainly an OD or a bank loan would be cheaper, but as you say you could well be knocked back again.

Have you spoken to the pdl companies and explained you're in financial difficulties. I know others on here have had some success speaking to certain companies.

You could contact National Debtline for impartial advice, you could do the CCCS online debt remedy tool which will set out what a good option might be for you.

Also, consider putting your SOA (statement of affairs) up on here and people usually have great suggestions for money saving.

SAAC

DVardysShadow · 2 July 2012 at 10:26PM

cleggy88 wrote: »

I tried last week to get a loan through Zopa, my plan was to pay off the credit card completely and cut the limit down to £400-£500 (just so that I have it in case of emergency) and have enough left to get me through this month without a loan and pay off some extra bills I've had this month (private hospital consultation). Unfortunately I was declined

It strikes me that you are actually trying too hard. What is the point of cutting the card down at this point - OK, lower interest, I totally get that.

But effectively, you are getting yourself a consolidation loan and getting yourself onto a treadmill which leads many into worse problems when they consolidate. The problem with a loan over a credit card is that you are on a treadmill of repayment to a timetable. It does not leave you so much slack and if anything goes wrong, you are back using the cards and the payday loans again.

Please just make your immediate target to yourself off payday loans. Have you done a Statement of Affairs?

lauras1712 · 2 July 2012 at 10:31PM

Write to them, they may be able to help most lenders will let u pay a reduced rate for a small time as long as you are paying towards to debt. This won't help you in the long run but it's worth a shot and will allow to you save money to eventually pay the whole lot off.

cleggy88 · 3 July 2012 at 8:30AM

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.................... 0

Monthly Income Details
Monthly income after tax................ 1174
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 1174

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 250
Management charge (leasehold property).. 0
Council tax............................. 0
Electricity............................. 33
Gas..................................... 33
Oil..................................... 0
Water rates............................. 33
Telephone (land line)................... 0
Mobile phone............................ 50
TV Licence.............................. 0
Satellite/Cable TV...................... 0
Internet Services....................... 35
Groceries etc. ......................... 200
Clothing................................ 0
Petrol/diesel........................... 0
Road tax................................ 0
Car Insurance........................... 0
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 100
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 8
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 14
Entertainment........................... 70
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 826

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

No Secured nor Hire Purchase Debts

Unsecured Debts
Description....................Debt......Monthly...APR
Credit Card....................1200......33.22.....29.9
Total unsecured debts..........1200......33.22.....-

Monthly Budget Summary
Total monthly income.................... 1,174
Expenses (including HP & secured debts). 826
Available for debt repayments........... 348
Monthly UNsecured debt repayments....... 33.22
Amount left after debt repayments....... 314.78

Personal Balance Sheet Summary
Total assets (things you own)........... 0
Total HP & Secured debt................. -0
Total Unsecured debt.................... -1,200
Net Assets.............................. -1,200

Council tax is included in rent.
No TV license as I don't watch TV.
£33 for each of the bills obviously varies month to month but that's around the maximum
Mobile phone bill will be reduced within the next 2-3 months once I can drop my tariff level
Entertainment includes £50 gym membership
Groceries is at £200 as I'm a triathlete so I eat considerably more than most, mostly from a local market so there's no room to save money there.

cleggy88 · 3 July 2012 at 8:43AM

DVardysShadow wrote: »

It strikes me that you are actually trying too hard. What is the point of cutting the card down at this point - OK, lower interest, I totally get that.

But effectively, you are getting yourself a consolidation loan and getting yourself onto a treadmill which leads many into worse problems when they consolidate. The problem with a loan over a credit card is that you are on a treadmill of repayment to a timetable. It does not leave you so much slack and if anything goes wrong, you are back using the cards and the payday loans again.

Please just make your immediate target to yourself off payday loans.

That is the immediate target. My line of thinking is that I would rather have it all cleared and be spending ~£100 a month on pay day and not have to worry about it anymore.

It would get me back on track financially so that in 3 months time when I need a bond to move house (no deposit at the current place as the landlord is a friend) I won't have to take out all the money I've just paid off on the credit card to afford it.

I've seen some loans around that allow you to make overpayments / finish early. As my salary increases over the next 2 years I should be able to make larger payments and have it paid off quicker.

patchwork_cat · 3 July 2012 at 9:57AM

Have you got any spare on your existing credit card? If not what about asking them to increase the limit?

You haven't put your payday loan down? Is it decreasing every time or not? Agree with dvardy, surely the aim should be to lose the payday loan initially and then look at reducing the credit card. You have already got into one loop by doing the payday loan, don't do it again.

DVardysShadow · 3 July 2012 at 7:56PM

cleggy88 wrote: »

That is the immediate target. My line of thinking is that I would rather have it all cleared and be spending ~£100 a month on pay day and not have to worry about it anymore.

It would get me back on track financially so that in 3 months time when I need a bond to move house (no deposit at the current place as the landlord is a friend) I won't have to take out all the money I've just paid off on the credit card to afford it.

I've seen some loans around that allow you to make overpayments / finish early. As my salary increases over the next 2 years I should be able to make larger payments and have it paid off quicker.

But there are very few loans which allow you a payment holiday.

Believe it or not, it is all too easy to overspend on paying down debt. Now, if it is credit cards and you have done this, but a bill comes along which you had not planned for, it is relatively straightforward to recover some of the overspend and you can keep yourself on an even keel

But if you are running your finances to the bone to pay off a loan, you won't get the money back which you have overpaid - which then leaves you short for the unplanned bill and in the position of having to default on something. In turn this will trash your credit record and blight your life for another 6 years.

I am fortunate never to have needed to fight my way out of debt, so feel free to ignore me. But I have twice had to fight with large mortgages and keep a financial discipline to get by. The credit card has been helpful at times, but never in a month of Sundays would I consider to deal with those problems with a loan.

At a guess, I would hazard that probably almost as many people have come unstuck with a consolidation loan by being over ambitious about clearing their debt in the first instance as have come unstuck through not trying hard enough.

If you really must take out a consolidation loan, please only take half your debt as a loan, so you still have some leeway with the cards.

cleggy88 · 3 July 2012 at 9:40PM

DVardysShadow wrote: »

I am fortunate never to have needed to fight my way out of debt, so feel free to ignore me. But I have twice had to fight with large mortgages and keep a financial discipline to get by. The credit card has been helpful at times, but never in a month of Sundays would I consider to deal with those problems with a loan.

At a guess, I would hazard that probably almost as many people have come unstuck with a consolidation loan by being over ambitious about clearing their debt in the first instance as have come unstuck through not trying hard enough.

If you really must take out a consolidation loan, please only take half your debt as a loan, so you still have some leeway with the cards.

No you're right and I appreciate the advice. A loan may get me get me out of trouble in the short term but probably isn't worth lumbering myself with debt for years to come.

Is a balance transfer worth looking into at all?