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Debt advice
norbie
Posts: 137 Forumite
Hello
I am posting today on behalf of a friend who has got himself into quite a lot of debt and I would like to help find out what is the most efficient way of him paying this off and starting afresh!
He is a young male living with parents so has very little outgoings, and earns a good wage. Here's the state of affairs:
Credit Card Debts:
£2,000 Mastercard @ 28%
Minimum monthly repayment £30
£10,000 Barclaycard @ 17%
Minimum monthly repayment £250
Loans:
£2,500 Sainsburys @ 10% (guess)
Monthly repayment £800
£1,200 Wonga
£3,000 Bank Overdraft
Total debt: £18,700
He is a good earner and takes home £1,650 every month after deductions.
He has come to me today and told me about his state of affairs. We have devised the following course of action, bearing in mind the rule of paying off the highest rate first.
I have today paid off the £1,200 Wonga loan for him. The Wonga loan was a last resort for him recently to try and help meet the minimum payments for the other debts which were overwhelming.
Obviously being the highest rate by far it needs eradicating immediately, and he would not be able to afford to pay it off in full this month whilst still meeting the minimum payments for the other debts. He will settle this debt with me over time - I am relaxed about this and wanted to do something to help, this gives him a fighting chance at least!
The Sainsburys loan is fixed at £800 repayment a month so whilst it is not the highest rate, that needs to be paid. At £800 a month, this will be cleared within the next 3 months.
This frees up an extra £800 a month to go towards paying the credit cards. The Mastercard being the priority at 28%, then he can start getting rid of that huge £10k Barclaycard lump!
This is the rough plan:
September
+ £1,650 wage
- £800 Sainsburys loan
- £250 barclays
- £30 MC
= £600 left to live on
October
+ £1,650 wage
- £800 Sainsburys loan
- £250 Barclaycard mninimum payment
- £30 Mastercard minimum payment
= £600 left to live on
November
+ £1,650 wage
+ £1,500 seasonal bonus
- £800 Sainsburys loan *DEBT CLEARED*
- £250 Barclaycard minimum payment
- £1,430 Mastercard (overpayment due to bonus)
= £600 left to live on
December
+ £1,650 wage
- £600 Mastercard *DEBT CLEARED*
- £450 Barclaycard
= £600 left to live on
January 2014
State of affairs:
Roughly £9,000 left on Barclaycard
£3,000 overdraft.
Debt total: £12,000
+ £1,650 wage
- £1,000 Barclaycard
= £600 left to live on
By August / September 2014 the Barclaycard should be cleared, and by December 2014 the overdraft also, and he can start building some savings.
Do people agree that this is the correct course of action to eradicating the debt as quick as possible? Is there any advantage or possibility of getting a product that would allow him to consolidate all these debts into one monthly repayment? (and at a lower rate?) He will make higher debt payments each month where possible.
I would be very grateful for your advice. Thank you.
I am posting today on behalf of a friend who has got himself into quite a lot of debt and I would like to help find out what is the most efficient way of him paying this off and starting afresh!
He is a young male living with parents so has very little outgoings, and earns a good wage. Here's the state of affairs:
Credit Card Debts:
£2,000 Mastercard @ 28%
Minimum monthly repayment £30
£10,000 Barclaycard @ 17%
Minimum monthly repayment £250
Loans:
£2,500 Sainsburys @ 10% (guess)
Monthly repayment £800
£1,200 Wonga
£3,000 Bank Overdraft
Total debt: £18,700
He is a good earner and takes home £1,650 every month after deductions.
He has come to me today and told me about his state of affairs. We have devised the following course of action, bearing in mind the rule of paying off the highest rate first.
I have today paid off the £1,200 Wonga loan for him. The Wonga loan was a last resort for him recently to try and help meet the minimum payments for the other debts which were overwhelming.
Obviously being the highest rate by far it needs eradicating immediately, and he would not be able to afford to pay it off in full this month whilst still meeting the minimum payments for the other debts. He will settle this debt with me over time - I am relaxed about this and wanted to do something to help, this gives him a fighting chance at least!
The Sainsburys loan is fixed at £800 repayment a month so whilst it is not the highest rate, that needs to be paid. At £800 a month, this will be cleared within the next 3 months.
This frees up an extra £800 a month to go towards paying the credit cards. The Mastercard being the priority at 28%, then he can start getting rid of that huge £10k Barclaycard lump!
This is the rough plan:
September
+ £1,650 wage
- £800 Sainsburys loan
- £250 barclays
- £30 MC
= £600 left to live on
October
+ £1,650 wage
- £800 Sainsburys loan
- £250 Barclaycard mninimum payment
- £30 Mastercard minimum payment
= £600 left to live on
November
+ £1,650 wage
+ £1,500 seasonal bonus
- £800 Sainsburys loan *DEBT CLEARED*
- £250 Barclaycard minimum payment
- £1,430 Mastercard (overpayment due to bonus)
= £600 left to live on
December
+ £1,650 wage
- £600 Mastercard *DEBT CLEARED*
- £450 Barclaycard
= £600 left to live on
January 2014
State of affairs:
Roughly £9,000 left on Barclaycard
£3,000 overdraft.
Debt total: £12,000
+ £1,650 wage
- £1,000 Barclaycard
= £600 left to live on
By August / September 2014 the Barclaycard should be cleared, and by December 2014 the overdraft also, and he can start building some savings.
Do people agree that this is the correct course of action to eradicating the debt as quick as possible? Is there any advantage or possibility of getting a product that would allow him to consolidate all these debts into one monthly repayment? (and at a lower rate?) He will make higher debt payments each month where possible.
I would be very grateful for your advice. Thank you.
0
Comments
-
First thing is for him to work out why he's got into nearly £20,000 debt while having 'very little outgoings'. If it's gambling he needs to tackle the addiction or he'll just run up the debts again.0
-
It was gambling and the stock market. He stopped months ago and I am inclined to believe him. He's been paying off and meeting all the minimum payments over the last few months but it has become overwhelming hence confiding in me today.
With nearly £20k of debt and no assets other than a £1000 car, is bankruptcy a viable option here?0 -
You have a strategy to clear the debts in a year or so. I would stick with that.
It also means that he can repay you the £1200 he owes you!0 -
I am just reading up about DMPs after seeing a few people talk about them.
Does it offer any advantages over the "plan" I have outlined above?
By the sound of it, it helps people create a repayment plan and a central place to pay the money to, rather than lower interest rates?0 -
I'd suggest running the list of debts through the Snowball Calculator, so you know the quickest/cheapest way to pay them off.
As for a DMP, personally I I'd avoid it if (as I assume is the case) the debts haven't been defaulted.0 -
This may sound harsh but why isn't your friend asking these questions?0
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