Massively in debt! Help please?

fuzzyhead1

Hello, sorry if this is in the wrong section, I'm new.

Myself and my husband are hugely in debt and it's got to the point where we can't afford basics each month and so each month get further into debt. This has come about due to having young children, husbands increased travel expenses, a job change, my lack of work etc etc.

We are 25k in debt. It's all on credit cards which we move around for 0% deals although it's got too large for this now and rather complicated! I am aware that we are now paying large amounts of interest on it each month as well. We haven't missed any payments on it or our mortgage but instead just get further credit card debt.

My husband wants to get a loan over 15 years to pay it back. My problem with this is that the one he has been offered is a secured loan on our house. We have no payment protection on our mortgage as it is (can't afford it) and so if he lost his job would be in terrible trouble immediately (no savings), add to that a loan secured on the house . . .

An unsecured loan would take the APR from about 7 to about 12. Is it worth paying that to not have our house at risk?

The loan would halve what we are paying each month on repayments but we still would struggle to make ends meet.

His plan is to overpay (he's checked we can do this without a fee) each year when he gets his bonus which could in theory have it paid off in 6 years.

I watched a video on here which suggests we are in debt crisis and should see a non profit debt advisor. Does anyone know what they could actually do to help? I don't want to declare bankrupt and am trying to avoid losing our home. We can't move anywhere cheaper as we are already in the cheapest part of the area so would mean a massive relocation.

I would like to have it added to the mortgage but we applied a while ago and they said no. Apparently because our debt is spread over about 5 cards, it's bad for our rating or something. So my husband thinks that if we put it all on one loan and wait a few months the bank may then say yes to adding it to the mortgage. The problem is that I am self employed and my earnings are very erratic (with some 0 earnings years) and they use that as a reason to say no. Also our mortgage is quite large already. When they looked at affordability they didn't think we could afford it. But we can't afford to live as things are anyway. We have tried a few times over the last few years. One time they said no because they couldn't guarantee that we would pay the debts off with it!

I'm sure I've left lots of important info out, sorry!

Can anyone help?

jackieblack

Contact these http://www.stepchange.org/Debtinformationandadvice/Debtsolutions/Debtmanagementplan/Nonprofitdebtmanagement.aspx

They can look at your finances, assess your debt problem and suggest the best solution for your situation

tiger_eyes

More borrowing doesn't fix debt.

It sounds obvious, but I think there's a temptation for debtors to think that getting a better loan (lower interest rate, longer term, whatever) will fix all their debt problems, whereas further borrowing only compounds their problems. We see it time and again on these boards. People who consolidated all their debt into what they thought would be a single manageable loan, then continued racking up debt, ending up deeper than they started. People who transferred their debt into a secured loan (or remortgaged) and are now in even deeper trouble. You cannot borrow your way out of debt. It just makes everything worse.

You need real advice from a proper debt adviser. Go to Stepchange. Every debt problem is fixable. Just please don't think another loan will fix everything.

Wishing you the very best of luck.

good_advice

Hello fussy
It is time to look at your spending habits and make changes.
Easy said, i know! It can be done with sacrifices.

Post a list of all your £ outgoing and we will try to help.

In my own personal journey I have learnt to cut back on most household bills. Home insurance, gas/electric. No paid for magazines, no hair dressers.
Very cheapTV, internet and phone package.( yes it can be done!)
Cheap caravan holiday.
Making things and mending what you have.
No meals out - take packed lunch.

It will not be an easy journey and many sacrifices will have to be made, some you will both not agree on.

You have a few lean years ahead. Cut back on spending and throw what you can at paying off the dept.

Good Luck.

fuzzyhead1

good_advice wrote: »

Hello fussy
It is time to look at your spending habits and make changes.
Easy said, i know! It can be done with sacrifices.

Post a list of all your £ outgoing and we will try to help.

In my own personal journey I have learnt to cut back on most household bills. Home insurance, gas/electric. No paid for magazines, no hair dressers.
Very cheapTV, internet and phone package.( yes it can be done!)
Cheap caravan holiday.
Making things and mending what you have.
No meals out - take packed lunch.

It will not be an easy journey and many sacrifices will have to be made, some you will both not agree on.

You have a few lean years ahead. Cut back on spending and throw what you can at paying off the dept.

Good Luck.

Thanks for your reply.

It's rather beyond cutting back a bit I think. We've been doing that for years!

We don't buy magazines, neither or us have been to the hairdressers for years. We haven't been abroad for 8 years apart from one holiday which was free accommodation which we drove to. I have left overs for lunch quite a lot, my husband takes a packed lunch. We hardly go out or buy new things. We don't have any Sky type packages and run 1 car which is essential for work. I mend our clothes and only buy new ones in sales or from Ebay.

We just live on the edge of London and so our mortgage is a lot and my husband has high travel expenses. I work from home to avoid childcare costs which would wipe out my earnings, although I had work lined up it fell through.

Although perhaps reducing the odd expense is a good idea it won't get us out of this mess. It's too far gone. Even if we saved 100 a month it would still take until after we retire to pay this back!

fuzzyhead1

tiger_eyes wrote: »

More borrowing doesn't fix debt.

It sounds obvious, but I think there's a temptation for debtors to think that getting a better loan (lower interest rate, longer term, whatever) will fix all their debt problems, whereas further borrowing only compounds their problems. We see it time and again on these boards. People who consolidated all their debt into what they thought would be a single manageable loan, then continued racking up debt, ending up deeper than they started. People who transferred their debt into a secured loan (or remortgaged) and are now in even deeper trouble. You cannot borrow your way out of debt. It just makes everything worse.

You need real advice from a proper debt adviser. Go to Stepchange. Every debt problem is fixable. Just please don't think another loan will fix everything.

Wishing you the very best of luck.

What should they have done then do you think?

fuzzyhead1

jackieblack wrote: »

Contact these xxx

They can look at your finances, assess your debt problem and suggest the best solution for your situation

Thanks.

I just had a look at the website and it sounds good so far. Is there a downside to this? Would we get a bad credit rating or something or would it affect other things we wanted to do in the future?

jackieblack

fuzzyhead1 wrote: »

Thanks.

I just had a look at the website and it sounds good so far. Is there a downside to this? Would we get a bad credit rating or something or would it affect other things we wanted to do in the future?

There is no downside to asking them for advice.
They will advise you on the possible consequesnces of any suggested course of action.

But TBH, from what you've said in your OP, your credit rating is already affected and the debt you have will affect other things you want to do in the future, which is why you need to get it under control asap.

tiger_eyes

fuzzyhead1 wrote: »

What should they have done then do you think?

I think most cases would have benefited from going straight to a debt management plan (DMP), in which priority bills like the mortgage are paid first, and creditors get a reduced payment out of what's left over after reasonable expenses. Often creditors will freeze interest on a debt once the debtor enters a DMP as well, which can be a big help. DMPs are designed to be manageable in the long term - they allow a reasonable amount for entertainment, a small emergency fund, etc - so it shouldn't be the kind of extreme deprivation people get when they pay the credit card bill first and buy food second. I really would recommend Stepchange as a free, impartial debt charity who can help you manage a DMP.

fuzzyhead1

jackieblack wrote: »

There is no downside to asking them for advice.
They will advise you on the possible consequesnces of any suggested course of action.

But TBH, from what you've said in your OP, your credit rating is already affected and the debt you have will affect other things you want to do in the future, which is why you need to get it under control asap.

Thanks, I will suggest it to my husband.

fuzzyhead1

tiger_eyes wrote: »

I think most cases would have benefited from going straight to a step change management plan, in which priority bills like the mortgage are paid first, and creditors get a reduced payment out of what's left over after reasonable expenses. Often creditors will freeze interest on a debt once the debtor enters a DMP as well, which can be a big help. DMPs are designed to be manageable in the long term - they allow a reasonable amount for entertainment, a small emergency fund, etc - so it shouldn't be the kind of extreme deprivation people get when they pay the credit card bill first and buy food second. I really would recommend Stepchange as a free, impartial debt charity who can help you manage a DMP.

Thank you. It does sound like this is what we need to do.