Debt Consolidation

Jo4

A friend has asked for my help as they can no longer afford their debt repayments and therefore if they could get 2 of their cards and 2 of their loans into one repayment it would then be manageable for them. Therefore tonight I applied for a Sainsburys loan for them and their application was turned down. I then applied for a Tesco loan but it too was turned down. They need about £16,000 and they would like to pay it back over 6 years, repayments are working out about £280 to £290 a month which they could afford as currently it is costing them about £540.

What should I do now? If they even got £15,000 they would be happy as they need to reduce the cost of their outgoings.

Eonel

Consolidation loans can be tough to come by at a reasonable rate of interest + are rarely advised as a good idea on this forum.

They can be tough to come by as your friend already owes £16,000. For the consolidation loan, he will be credit assessed for an additional £16,000. £32,000 in total.

It works this way because after he get the consolidation cash, there is no absolute guarantee to the lender that he will use the money to pay off the original debt.

Consolidation loans are rarely advised as a good idea as after he uses the consolidation cash, there is no guarantee that he will ccompletely close his existing lines of credit.

There are many stories on these forums of people getting the consolidation loan, and within a couple of years re-racking up the credit card debt, leaving them twice as much in debt.

My advice is for you friend to head over to the Debt Free Wannabe forum. Prepare a statement of affairs and listen to their advice on reducing outgoings. Seek advice from one of the debt charities. Good luck.

CLAPTON

Jo4 wrote: »

A friend has asked for my help as they can no longer afford their debt repayments and therefore if they could get 2 of their cards and 2 of their loans into one repayment it would then be manageable for them. Therefore tonight I applied for a Sainsburys loan for them and their application was turned down. I then applied for a Tesco loan but it too was turned down. They need about £16,000 and they would like to pay it back over 6 years, repayments are working out about £280 to £290 a month which they could afford as currently it is costing them about £540.

What should I do now? If they even got £15,000 they would be happy as they need to reduce the cost of their outgoings.

you have forgotten to tell us what their income is
and what their credit files say

Jo4

Eonel wrote: »

Consolidation loans can be tough to come by at a reasonable rate of interest + are rarely advised as a good idea on this forum.

They can be tough to come by as your friend already owes £16,000. For the consolidation loan, he will be credit assessed for an additional £16,000. £32,000 in total.

It works this way because after he get the consolidation cash, there is no absolute guarantee to the lender that he will use the money to pay off the original debt.

Consolidation loans are rarely advised as a good idea as after he uses the consolidation cash, there is no guarantee that he will ccompletely close his existing lines of credit.

There are many stories on these forums of people getting the consolidation loan, and within a couple of years re-racking up the credit card debt, leaving them twice as much in debt.

My advice is for you friend to head over to the Debt Free Wannabe forum. Prepare a statement of affairs and listen to their advice on reducing outgoings. Seek advice from one of the debt charities. Good luck.

They are certain they are paying their debt so they can reduce their debt as they are looking for the light at the end of the tunnel. I will look for the link to complete a statement of affairs but I will be doing it on what they have informed me. The person who has asked me to help is making themselves unwell with worry about their situation.

I should be in bed but I can't even think about bed yet as I haven't helped them to resolve this and if they don't get it sorted I fear they could lose their home and their youngest child is going to be 1 year old next month.

Jo4

CLAPTON wrote: »

you have forgotten to tell us what their income is
and what their credit files say

Their annual income is approximately £30,585.00 and I haven't seen their credit files although the person who asked for help said they had only ever been late with two credit card payments.

Jo4

Hopefully this will give you an idea. They got a one year old car in June as the last one was only worth £600 and it was going to cost over £1,000 to fix and it was in the garage every week so it wasn't economical to keep repairing it. This is why I have put nothing down for maintenance although I know it will need new tyres at some stage. The HP for it is over 5 years and I am guessing they have 3 months paid. I don't know what the total outstanding on the mortgage is or what the apr's are for it, the HP or the loans. They are reducing their Sky package to the minimum package as soon as the digital switchover happens in their area, 13th October afaik. They do have home insurance but I do not know how much they are paying. I am guessing what the value of their car and house is.

BTW she works two part time jobs, leaving home at 8:15am and she usually returns between 5pm and 6pm on weekdays. She used to work every weekend (she never had one day of unless it was booked of as a holiday) so now she works every second weekend. Today she found out that she may not have one of her jobs at Christmas because it will be either her thats loses her job or her colleague.

She is hoping/kind of expecting me to have a solution in the morning, hence why I haven't closed an eyelid yet and neither has poor hubby because he knows about it too as there are no secrets in my marriage.

Statement of Affairs and Personal Balance Sheet
Household Information
Number of adults in household........... 2
Number of children in household......... 4
Number of cars owned.................... 1
Monthly Income Details
Monthly income after tax................ 1256.67
Partners monthly income after tax....... 0
Benefits................................ 1412.95
Other income............................ 0
Total monthly income.................... 2669.62
Monthly Expense Details
Mortgage................................ 797.5
Secured/HP loan repayments.............. 218
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 19.86
Electricity............................. 172
Gas..................................... 0
Oil..................................... 32
Water rates............................. 0
Telephone (land line)................... 34
Mobile phone............................ 45
TV Licence.............................. 12.12
Satellite/Cable TV...................... 50.75
Internet Services....................... 15.29
Groceries etc. ......................... 480
Clothing................................ 0
Petrol/diesel........................... 160
Road tax................................ 8.75
Car Insurance........................... 20.83
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 84
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 30.01
Other insurance......................... 32.53
Presents (birthday, christmas etc)...... 100
Haircuts................................ 5
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 2317.64

Assets
Cash.................................... 0
House value (Gross)..................... 120000
Shares and bonds........................ 0
Car(s).................................. 10000
Other assets............................ 0
Total Assets............................ 130000

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 0........(797.5)....0
Hire Purchase (HP) debt ...... 12426....(218)......0
Total secured & HP debts...... 12426.....-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
Black Horse....................2492.42...178.......0
Home Loan......................1283.88...213.9.....0
Nationwide CreditCard..........8000......238.8.....23.9
TV.............................600.......25........0
Bank of Ireland - Her..........1800......44........23.9
Bank of Ireland - His..........3000......79........23.9
Total unsecured debts..........17176.3...778.7.....-

Monthly Budget Summary
Total monthly income.................... 2,669.62
Expenses (including HP & secured debts). 2,317.64
Available for debt repayments........... 351.98
Monthly UNsecured debt repayments....... 778.7
Amount short for making debt repayments. -426.72
Personal Balance Sheet Summary
Total assets (things you own)........... 130,000
Total HP & Secured debt................. -12,426
Total Unsecured debt.................... -17,176.3
Net Assets.............................. 100,397.7
Created using the SOA calculator at www.stoozing.com.
Reproduced on Moneysavingexpert with permission, using IE browser.

forgotmyname

They are not on 30k a year from those figures 15k and benefits. I read another post recently and its a bit hit and miss if they count benefits.

I guess the cheapest options wont include it.

Having had 2 applications turned down already you need to stop applying for at least 6 months.

I think they should think about dropping the TV package down now. They can watch most stuff online anyway.
£170 a month electric? Thats double my gas and electric bill. Lots of appliances, games systems etc? I think they may need to curfew them.
I used to leave my PC running 24/7. But it costs an extra £40 - £50 a year so dont do that anymore.

Consolidation isnt the way unless you can get 0% to replace the 23.9% deals.
But having failed twice to get loans thats a no go for the time being.

I'm afraid they will need to cut everything back. Suffer now to benefit later.

Cut back and ebay as much as they can to clear the highest rate card. Even if its the £44 a month one you put. Thats £44 extra to pay the next one.

Hopefully the people who know best will be waking soon to give better advice.

Jo4

forgotmyname wrote: »

I think they should think about dropping the TV package down now. They can watch most stuff online anyway.

They have one laptop which was away being repaired and they found out yesterday that since it cannot be repaired that it is going to be replaced.

forgotmyname wrote: »

£170 a month electric? Thats double my gas and electric bill. Lots of appliances, games systems etc? I think they may need to curfew them.
I used to leave my PC running 24/7. But it costs an extra £40 - £50 a year so dont do that anymore.

She is constantly switching things of when she is at home however their 3 year old is constantly switching things on. Since there are so many in the house there's always someone in the shower, the washing machine is on quite a few times every day, the tumble dryer is on if it is too wet to get it dried outside and the airers and radiators are full, the cooker is electric, the dishwasher is on often, there is a lot of ironing to do because of them having a big family imho.

forgotmyname wrote: »

Consolidation isnt the way unless you can get 0% to replace the 23.9% deals.
But having failed twice to get loans thats a no go for the time being.

I'm afraid they will need to cut everything back. Suffer now to benefit later.

Cut back and ebay as much as they can to clear the highest rate card. Even if its the £44 a month one you put. Thats £44 extra to pay the next one.

Should I have applied for a 0% credit card, have I made their situation worse? They have cut back on anything possible apart from Sky. They only things they have which they can sell is two vans, one worth £1,000 and one worth £4,000 but he is adamant that he is not selling them although she is trying her best to persuade him and has told him that something for them would be better than nothing.

forgotmyname wrote: »

Hopefully the people who know best will be waking soon to give better advice.

Thank you for your help!

She cannot keep going the way she is, her health is suffering because of the stress. She needs something done about it now but what can I do? I fear she is going to lose their home.

dealer_wins

I would say they need to post on the debt free wannabe board. They will not get a loan from any mainstream lender, and are already living way beyond their means and are heading for disaster from that statement of affairs.

Tixy

Don't apply for anything else in their name.

Given their income and debt they won't be accepted for anything that will help, any potential lender will already realise that they cannot afford their existing commitments and so won't think they will be able to afford to pay any new loan / card.

This isn't something you can do for her - its something you can help her with but she needs to do this for herself.

You need to work with her to get an accurate statement of affairs, find out the cost of items you have not included.

Suggest to her she gets in touch with one of the debt advice charities (maybe make a call to them together, or complete the CCCS debt remedy tool online together and then contact them).
A debt management plan may be the best option in their situation - and if you are speaking to her I would suggest that this may be a potential solution but she will need to talk to one of the charities.

Whatever option they choose they will need to make cutbacks. Things like the grocery spend and present spend will need to be reduced, as will the spend on electric. And at least 1 if not both of the vans sold - her partner also needs to buy in to getting them out of debt if they want to stay afloat.
And the phone/sky/internet combined cost needs to be addressed - they could get a combined package for less than half what they pay.

Link - IMPORTANT - Where to seek professional impartial advice about your debts.

Jo4

Tixy wrote: »

Don't apply for anything else in their name.

Given their income and debt they won't be accepted for anything that will help, any potential lender will already realise that they cannot afford their existing commitments and so won't think they will be able to afford to pay any new loan / card.

This isn't something you can do for her - its something you can help her with but she needs to do this for herself.

You need to work with her to get an accurate statement of affairs, find out the cost of items you have not included.

Suggest to her she gets in touch with one of the debt advice charities (maybe make a call to them together, or complete the CCCS debt remedy tool online together and then contact them).
A debt management plan may be the best option in their situation - and if you are speaking to her I would suggest that this may be a potential solution but she will need to talk to one of the charities.

Whatever option they choose they will need to make cutbacks. Things like the grocery spend and present spend will need to be reduced.
And the phone/sky/internet combined cost needs to be addressed - they could get a combined package for less than half what they pay.

Link - IMPORTANT - Where to seek professional impartial advice about your debts.

The grocery spend had been over £200 a week. They have 6 children in total, 2 are at university although they come home at weekends. The present spend is because they still have to put over Christmas for the younger children although when it comes to birthdays they have tea and a birthday cake from Asda (normally a relative purchases the cake).

Due to the are they live in they are on the cheapest internet they can be. Their telephone package is the cheapest and they are going to reduce their Sky shortly.

I am at a loss!