The best path to freedom

R997

Hi,

A while ago my wife's business got into difficulties and profits (which had never been massive) began to decline sharply. Finally in February this year the business stopped making enough money for the partners to take any profit share. We did eventually manage to extract ourselves from the business with no exposure, but nothing to show for our investment either. While all this was happening we still had to find the money for bills, rent and childcare. We did avoid bankruptcy, which looked to be on the cards for a while, and even though my job is good and my wife did some temping and supply work, and we sold most of our assets, we're still left carrying a significant amount of debt. Thankfully my wife recently started a new teaching job which pays quite well, so things are looking better.

Currently our debts look like this:
Barclaycard: £11000
Barclays loan: £7500
HSBC loan: £3100
HSBC credit card: £6500

A scarily large total of £28100.

Our net income is £4300pcm now we're both working for money and not fresh air.

The first couple of months are essentially written off to HSBC late payment charges, but after this we should be in a position to start clearing our debts at a reasonable rate.

My question is where to start. Should we be looking to amalgamate debts into one large pot to be paid at £1200pcm, or are we better off looking at 0% credit cards, or something else? I've never been in this position before, so I really don't know where to start.

We still have significant childcare costs, but these are diminishing as our kids are now at school or will be getting their sixty hours a month at pre-school.

I want to clear this mountain of debt as quickly as possible so we can focus on buying a house and giving our kids a more varied childhood than we've been able to manage in the last couple of years.

Thoughts welcome. Thanks. R997.

Tixy

Hi

First you need to look out the APRs on each debt.

Have you worked out how much you can put towards the debts each month - is this the £1200? is that the max you can afford?

Next I would suggest you start by looking at the snowball calculator - to see how long it would take to clear your existing debts at a rate you can afford a month. Once you know that as a starting point you can consider if there are any options that will cost you less in interest.

What are your credit files like? did you manage to always keep on top of payments? not have missed payments or defaults? It sounds like you may have negatives on your files if you have been paying late payment charges.
If you have been inarrears / missed payments then your chance of getting new credit at a decent rate is slim.

If your files are clean, and depending on your current APRs it might be worth looking to see if you could get a 0% card to move some of the more expensive debt to.

You won't get an unsecured loan to cover all your debts and depending on the APRs might not be able to beat the current APRs at all (as costs are generally rising compared to a few years ago).

Useful Snowball calculator on whatsthecost.com

R997

Thanks for the advice.

Even though I'm pretty sure we can get out of the mess we're in it's still terribly disheartening to see the snowball calculator predicting a date in 2017 before it's all gone.

My credit file it okay. I've incurred some bank charges but never missed a payment on my loan or card. My wife's not so good having gone into HSBCs collections system.

I guess we'll just have to sit out and wait for the debit to be gone. It's amazing how quickly it stacks up, and how long it takes to get rid of it again. :-|

unimaginative_user_name

I don't know how practical it would be with children but could your wife get extra work tutoring or marking exam papers? Could she register as a child minder during the school holidays?

If you post your Statement of Affairs on here (list of incomings and outgoings) people might be able to suggest areas where you could make extra savings and pay off your debt a bit quicker. I haven't been a member long enough to post links yet but I'm sure someone else will be along later to do this for you.