Struggling with debt? Ask a debt advisor a question

chutyeh

Hi

I am currently in debt to the following sums:

Unsecured loans - £18,000.00 (monthly payments total £550.00)
Credit Cards - £4,700.00 (monthly payments total £180.00).

I have been chipping away at this debt for a few months now - my credit 'score' is excellent, and I have never, ever throughout my life missed a payment.

My plan is to take out a debit consolidation loan. Unfortunately a large portion of the debit are with payday loan companies and high interest providers. However, despite a good credit 'score' I am getting declined.

I imagine it is for the following reasons:

- A significant amount of the debt was accumulated quite quickly in the past three months
A significant number of checks appear on my credit reports this year
- My debt to credit (credit utilisation) ratio is 93%
- My debt to income ratio is 47%

Its the third and fourth points I would like help on. It is my understanding that my debt to income ratio has little impact on my credit score, but my debt to credit ratio does. The problem is, is that I am struggling to pay more than the minimum payments on the credit cards, as the loan repayments take up a lot of my spare cash.

What would you suggest my options might be? Really I want to be in a position where I can take out a more favorable loan which will reduce my monthly loan payments - i.e. improve my credit report.

If it helps, I'm 29, earn, £28,000.00 p/a, do not have a mortgage. I am also not interested in a DMP.

Cheers

Rich

Former_StepChange_Rory

icebergx wrote: »

Thanks for this, James.
What are your opinions on Credit Unions? I was going to suggest that he approach one or two of them for a loan, as their "position" appears to be more sympathetic/understanding of those with a bad credit history.
Alternatively, which lenders (in your experience) appear to be more sympathetic of my friend's circumstances?

Thanks.

Hi icebergx

Credit unions can be a good alternative to high street banks and other types of expensive lending. There are lots of reasons why people choose credit unions over banks for example having a poor credit rating or looking for an account with some more flexibility.

Most local areas have a credit union and you can find out more about these by visiting our credit union page.

Hope this is helpful, all the best.

Rory

QuadDee

Hi all.

I have got myself into a lot of credit card debt (aprox £16,000)
I can't pay it. I have no income.

Do I enter a IVA or go Bankrupt?

How long does an IVA or Bankruptcy last for? and when will I be able to have a normal life again?

I have a lot of questions but lets start off small.

Thanks

Cantsleep80

Hiya all!

I have been struggling with debt for a while now and ignoring it (I know this is stupid and wrong) using payday loans to pay bills etc but then being unable to pay them back! I have kept it from family and friends but plucked up the courage to tell my husband today! I needn't have worried as he is being very understanding. We agreed to call step changes who were fantastic, but after finding out the true extent of our debt problem have been advised to take out an IVA! This has set off the worry again! Has anyone had one or in one at the moment?
I just want a good nights sleep 😥

Former_StepChange_Laura

QuadDee wrote: »

Hi all.

I have got myself into a lot of credit card debt (aprox £16,000)
I can't pay it. I have no income.

Do I enter a IVA or go Bankrupt?

How long does an IVA or Bankruptcy last for? and when will I be able to have a normal life again?

I have a lot of questions but lets start off small.

Thanks

Hi QuadDee,

Thank you for your message and welcome to the forum.

In the UK personal bankruptcy usually lasts for a year, but the process varies depending where in the UK you live. You might find our guide to bankruptcy useful as it has answers to a lot of frequently asked questions.

An IVA usually lasts between 5 and 6 years, depending on your circumstances. Again, we have a guide to IVAs which could answer any other questions you have about this type of debt solution.

In order for us to advise you as to the best solution for your situation, I’d suggest getting in touch with us for free and independent debt advice. We’ll be able to go through your financial circumstances with you in more depth and work out the best way forward to deal with your debts.

You can either do this using our online tool Debt Remedy, or by contacting us.

I hope this helps,

Laura

Former_StepChange_Laura

Cantsleep80 wrote: »

Hiya all!

I have been struggling with debt for a while now and ignoring it (I know this is stupid and wrong) using payday loans to pay bills etc but then being unable to pay them back! I have kept it from family and friends but plucked up the courage to tell my husband today! I needn't have worried as he is being very understanding. We agreed to call step changes who were fantastic, but after finding out the true extent of our debt problem have been advised to take out an IVA! This has set off the worry again! Has anyone had one or in one at the moment?
I just want a good nights sleep 😥

Hi there,

It’s great to hear that your husband has been supportive and that you’ve been in touch with us already. You’ve clearly acknowledged your debt and have started taking steps to deal with it, which is a massive achievement.

Being recommended for an IVA may feel daunting, but there’s a lot of help and support out there. I’m not sure if you’ve already seen this, but here’s a link to the existing clients page on our website. There’s loads of information on there about what you can expect while you’re on an IVA, top tips for making sure it runs smoothly, and answers to a list of questions we’re frequently asked by clients on an IVA. There’s also a contact number on there for our StepChange Voluntary Arrangements team, who would be happy to go through any concerns you might have.

Our MoneyAware blog has plenty of articles about living on an IVA, sticking to a budget, and making your money go further. You might find this blogpost of 5 IVA survival tips interesting to have a look at.

We’re here to support you throughout your IVA, so if you have any questions please just get in touch.

Kind regards,

Laura

changeforbetter

Hello,

Could someone please let me know if possible - what usually happens to an overdraft debt (bank) if one takes out a DMP?

I see that most discussion centres around CC debts and repayments/interest, but not seen much about what happens to an overdraft.

Also, if the person taking out the DMP has both a CC and overdraft debt with the same bank?

Many thanks for any advice (as this is my situation!)

Kisnatch

First time on the forum so hello!

So, after a few years of being an absolute plonker with money, I really need to sort myself out.

In my reckless youth I ran up a few debts, and tried to pay them off very unsuccessfully. I currently only have a few outstanding but I want to know what the best way to go about clearing them are if anyone could help?

Overdraft: I have £2,010 in a Natwest overdraft. This was my student overdraft with a limit of £2,000 however the interest-free limit has now been reduced to £500 as I’m 3 years out of university. I’ve got that down to £2,010 from about £2,500 in the last few months but the interest is still making life difficult.

Existing debts: I have a few existing debts on my file (I did a Noddle report) but I’m a bit confused about the best way to clear them.

1) A debt of £1,000 to a Lowell communications which the default date is 17/10/2008
2) A debt of £370 to Motormile which the default date is 01/01/2010

Now, I haven’t acknowledged either of these and someone was saying the Lowell debt will drop off my file in 6 years?

I’ve got myself onto the electoral roll now and have got some more bills in my name but somebody was saying potentially get a credit card for people with no credit history and spend a little on that each month?

I’ve moved a lot in the last few years but I’d really like to actually be able to start saving some money so it would b great to get some advice 

Former_StepChange_Rory

changeforbetter wrote: »

Hello,

Could someone please let me know if possible - what usually happens to an overdraft debt (bank) if one takes out a DMP?

I see that most discussion centres around CC debts and repayments/interest, but not seen much about what happens to an overdraft.

Also, if the person taking out the DMP has both a CC and overdraft debt with the same bank?

Many thanks for any advice (as this is my situation!)

Hi changeforbetter,

Thanks for posting, this is a question our advisors get asked quite a lot!

Most of the time, the bank decides to close or freeze the account so that you can't use it anymore. The overdraft would then be included on the debt management plan (DMP) in much the same way as your other unsecured debts.

If your bank knows you're having financial problems then its likely that they'll take any money that's paid into your account to repay any overdraft you have.

The bank are within their rights to do this, and they don't have to give you the money back, even if you need it to pay your bills.

This is why it is so important to change your bank account to an unconnected bank, something we usually recommend when you've got an overdraft. You can read more about bank accounts in the existing clients section of our website.

If you have other products with the same bank such as a loan or credit card then something called the 'right of offset' can apply. This means that the creditor (or bank in this case) can take money from your account to pay towards these debts. This sometimes causes issues but we've covered how to deal with this in more detail on our MoneyAware blog.

This can sound quite difficult and worrying sometimes but there's some simple steps you can take to help stop this happening. Have a read of the article or talk to us if you've got any other questions. Details of how to get in touch are available on the StepChange website.


Hope this helps.

Rory

changeforbetter

That is very useful yes, thank you.

I am looking at setting up a separate bank account (away from my other accounts) at the moment, which sounds like it tallies with your information there. Many thanks.