Debt Free Wannabe - unsure of where to start

lola.lo

Hi all

I've been reading the posts on here for a few weeks now and they've both inspired and encouraged me to a)post on here and b)confront my current situation.

Apologies as this will probably turn out to be a long post, thank you in advance for reading!

Past

I started working at the age of 17 (2007) on a rather basic wage. However I was living well beyond my means (this will be a common thread throughout this post) and began taking out credit on catalogues, mismanaging my money and as a result missing payments on my phone contract and catalogue repayments as well as borrowing money from my family.

In the end I arranged deals with each company to pay £1 a month. I did this for a while but then my parents helped me out to settle each of my debts.

However in around 2010 I took out a payday loan (QuickQuid) to help me out when going on holiday that month. I then got into a cycle of needing to take out a payday loan each month to give me enough money to last the month. I managed to break this cycle in March 2013, though as you'll see shortly that isn't the end of my payday loan use.

Around this time I was also accepted for a Vanquis card with a small credit limit which I promptly spent.

Current

My current situation is that I have:

A vanquis card with £3,000 limit on which I have basically reached (I currently have £16.47 to spend on it). I usually spend on this each money and then pay that amount + the minimum payment back. I assume that I owe Vanquis more than £3,000 taking into account interest but not sure what this figure is.

2 payday loans - yes I know! In October last year I took out a flex loan with Quick Quid for the total sum of £850. Each month I have paid it but then usually taken out the "available funds" again as I've felt I don't have enough money for the month. The total I have to pay at the moment is £1,800.64 of which most is interest (and makes me feel sick looking at it)

I also took out a Wonga loan for a small sum in February but again the cycle has continued and I currently owe £132.23. I'm planning to pay this on my next payday and resist the temptation to use it again (easier said that done).

The worst however is debt owed to family which totals £3,000. This is the one that I absolutely for obvious reasons want to get back on track with and the one that keeps me awake at night. I feel so ashamed and know I'm a horrible person for betraying their trust in me (saving money I would pay as rent to them, on their behalf) when they have been so supportive of me.

I feel like I've ruined mine and my family's prospects with impulsive spending and I don't know why. I have had issues in the past with mental health etc. but I don't feel that is an adequate excuse for the mess I've got myself in.

When I look at what my outgoings would be if I wasn't in debt I want to cry. If only I hadn't got into this situation I could be well on my way to having a deposit for a house and be in a good situation. I'm 25 years old and don't have any savings to speak of and not even a pension plan. I'm so ashamed of how stupid I've been but I don't want to let anyone in real life know as they'll think I'm such a bad person.

I am an impulsive spender with good intentions and seem unable to resist temptation and keep a budget going. It's like I only see short term rewards and not the long term rewards of being comfortable. I seem to think of money as a payday to payday thing rather than a long term investment and I'm not sure how to change this mindset completely so it is a way of life. I sometimes dare to look at credit report on Noddle and cringe as I know I've set myself back years and years with the way I have managed money.

Options

I looked at poor credit loans on the internet and was funnily enough directed to MSE which in turn directed me to Everyday Loans. I could potentially get a loan of £4,000 for a period of 3 years (£200.00 a month payment) which would put me back on track with the money owed to family and also allow me to pay off £1,000 of the Quick Quid loan. I would then just have two payments going out - one to Right Loan (at a significantly reduced interest rate than Quick Quid) and the other to Vanquis.

I've calculated how this would look in terms of my finances and if I did this and then spent 2/3 months paying off the rest of the QuickQuid loan, after the QQ loan was paid off I would have £667 per month after rent, bills (travel and phone contract, I am cancelling the gym this month) my credit card payment (which I could pay a little bit more than the minimum for) and the Everyday Loan payment. I've not had that amount of money free in a long time and this option looks to be a good one to me but would appreciate any advice.


I feel like I'm well on my way to finally confronting my situation - for a long time I've buried my head in the sand about my finances and as a result spent money doing things to distract me. I know I need to help myself and no-one else can do this for me - now I'm thinking towards the future and know that I do not want to be in this situation when I have a house and family to look after.

Apologies if this has been woe is me and pititful but as I can't really discuss this with anyone in real life it has been quite cathartic!

sourcrates

Hi,
Familiar story, you are in no way unique believe me, firstly I would be loathed to take out further borrowing to repay outstanding debt, it may seem an easy option, but essentially it keeps you in the cycle of borrowing, a few months down the line something else will crop up that needs paying, so you get another PDL and so on, the cycle starts again.
My advice, take a step back, re-take control of your money, and where it goes, I would suggest opening a new basic bank account with a bank you have no financial ties too, also cancel any constant payment authorities you have with your lenders, with your current bank, then, write, don't phone, write, to all your creditors explaining your financial situation, and that you will be in touch with them shortly with an offer of payment, they are then obliged to hold any collections activity for a period of a month, in order to give you some time.
You then work out what you can comfortably afford to pay towards your debts each month, then split that amount between your creditors, this is what I would do.

Tixy

Hi and welcome to the forum.

Your situation will be familiar to others on here.

I would definitely not take out any new loan or credit until you have very carefully worked out a realistic budget to see what you have coming in, what you are spending and what you have available for debts repayments. My guess is that you can get out of this financial mess without taking on another loan, and you may find that you learn much better financial management from doing so which will help you long in to the future.

I am surprised you say you were directed to everyday loans by MSE. But before you take on a loan with them I would do a search in the loans section of this forum for mention of their name. Most posts are not positive, and not only due to the high APRs (often 75% to 100%).

I definitely wouldn't be taking out a very high interest loan to repay family. Talk to your family. Work out what you can afford a month, my guess is they would be much happier with you paying say £100 or £200 a month off the debt rather than costing you thousands of pounds in interest to be able to repay it to them in a lump sum.

lola.lo

Hi Sourcrates & Tixy, thank you for your advice and you're right regarding the loan, it's the easy option rather than the difficult one of holding my hands up to this situation!

With regards to the payday loan, would they freeze the interest or would this continue to accumulate if I made them aware of my financial difficulties? Part of me thinks I should just have a tough 4/5 months and clear it paying off as much as I can (£300 a month) rather than drawing it out any longer..

Tixy

On the payday loan if you arrange a repayment plan with them they should freeze interest after, at the most, 2months. So the debt won't keep building up and up.

sourcrates

As Tixy, lovely name by the way , says above, most payday lenders now have payment arrangement plans in place, I say most, the worst bottom feeders may not, but the mainstream lenders should be able to stop interest and charges as a matter of norm, but you need to ask, don't assume they will.

NHS_worker_bee

lola.lo wrote: »

Part of me thinks I should just have a tough 4/5 months and clear it paying off as much as I can (£300 a month) rather than drawing it out any longer..

Hi and welcome

I've been in your situation and so I can say from personal experience: please don't take out a loan with everyday loans, you will end up paying so much in interest. I did this, and although I've now paid off the loan, I'm now back to square one debt wise, and tackling it the slow and steady way of actually paying my debt off rather than taking out more credit...

I know you don't see it this way but the fact you owe money to family members is actually a positive thing (it won't damage your credit file or lead to creditors phoning you etc). Also presumably your family aren't charging you interest? I wish I had borrowed money off my family rather than thinking I could tackle everything myself. Rely on your family rather than everyday loans! You will be able to pay your family back in full eventually and you will be in a much better place and have learnt some invaluable lessons from this whole experience (I know I have done). Below are my suggestions based on the information in your first post:

Step 1) Pay off the Wonga loan on your payday and then once you have repaid it completely obviously do not take out a new loan and lock yourself out of your Wonga online account (purposely enter an incorrect password enough times and it will be locked. You'd need to phone to company and verify your identity to get it unlocked...it just helps remove the temptation of taking another payday loan when it all seems overwhelming.) Although this is your smallest loan, paying it off will stop it spiralling out of control like the quick quid loan and also emotionally, it feels good to be completely free of a debt.

2) Tackle the QuickQuid situation (As the other posters have already said, contact the lender in writing) - this needs to be a realistic solution for you - you need to be paying off enough each month to cover the interest charges and make a dent in the balance that you owe so that the debt is reducing, but not paying off so much that you have nothing left to live on and end up needing to take another payday loan or spend on your credit card...which leads to...

3) The Vanquis CC - keep making at least the minimum payments (have you got this set up as a direct debit in case you forget?) whilst you tackle the payday loans then you can overpay on the credit card once you have cleared both payday loans (you should find you have a lot more disposable income to throw at the debts when you aren't paying for payday loans).

You could look at shifting your credit card balance to a 0% balance transfer card to save more money - use MSE pre-eligibility checker to see which cards you may be able to get.

I've been there, you can do it, yes it is going to be a hard few months at least but you can motivate yourself by the fact that the sooner you pay these debts off, the sooner you can pay your family back. So many people on this forum have been in similar situations and are now debt free or on the road to being debt free. Read their stories and feel inspired. Hope this helps, best wishes.

dubs57

The advice given above is really good.From experince I agree that this is your way forward. The worst thing to do would be to take out another loan.The way out of this situation is to arrange it so that you are paying back just what you can afford. It might seem a long way round but it is the only way your debts will start gong down.

lola.lo

NHS_worker_bee wrote: »

Hi and welcome

I've been in your situation and so I can say from personal experience: please don't take out a loan with everyday loans, you will end up paying so much in interest. I did this, and although I've now paid off the loan, I'm now back to square one debt wise, and tackling it the slow and steady way of actually paying my debt off rather than taking out more credit...

I know you don't see it this way but the fact you owe money to family members is actually a positive thing (it won't damage your credit file or lead to creditors phoning you etc). Also presumably your family aren't charging you interest? I wish I had borrowed money off my family rather than thinking I could tackle everything myself. Rely on your family rather than everyday loans! You will be able to pay your family back in full eventually and you will be in a much better place and have learnt some invaluable lessons from this whole experience (I know I have done). Below are my suggestions based on the information in your first post:

Step 1) Pay off the Wonga loan on your payday and then once you have repaid it completely obviously do not take out a new loan and lock yourself out of your Wonga online account (purposely enter an incorrect password enough times and it will be locked. You'd need to phone to company and verify your identity to get it unlocked...it just helps remove the temptation of taking another payday loan when it all seems overwhelming.) Although this is your smallest loan, paying it off will stop it spiralling out of control like the quick quid loan and also emotionally, it feels good to be completely free of a debt.

2) Tackle the QuickQuid situation (As the other posters have already said, contact the lender in writing) - this needs to be a realistic solution for you - you need to be paying off enough each month to cover the interest charges and make a dent in the balance that you owe so that the debt is reducing, but not paying off so much that you have nothing left to live on and end up needing to take another payday loan or spend on your credit card...which leads to...

3) The Vanquis CC - keep making at least the minimum payments (have you got this set up as a direct debit in case you forget?) whilst you tackle the payday loans then you can overpay on the credit card once you have cleared both payday loans (you should find you have a lot more disposable income to throw at the debts when you aren't paying for payday loans).

You could look at shifting your credit card balance to a 0% balance transfer card to save more money - use MSE pre-eligibility checker to see which cards you may be able to get.

I've been there, you can do it, yes it is going to be a hard few months at least but you can motivate yourself by the fact that the sooner you pay these debts off, the sooner you can pay your family back. So many people on this forum have been in similar situations and are now debt free or on the road to being debt free. Read their stories and feel inspired. Hope this helps, best wishes.

Thank you so much for this advice, it has made things very clear in my mind!

Thank you for the too RE wonga as well as I was wondering how I could make sure I don't give into temptation- I'll do this as soon as I've paid off the loan.

RE QuickQuid I have emailed them today outlining my converstion with one of the advisors and also that I can't afford the payments they are advising but am willing to work with them on a repayment plan.

I feel a little bit lighter now that I am actually taking some action rather than burying my head in the sand- I have a goal of saving £10000 towards a house deposit with my partner by Jan 2017 and this is keeping me focused!

NHS_worker_bee

That's good news, I'm glad I could be of some assistance. I'm really speaking from the heart here when I say don't get another loan because I was in a very similar situation. I had payday loans which I paid off with an everyday loan. Now I've paid off the everyday loan but I had to live on my credit card to do it, and my partner helped me. If I hadn't taken the stupid everyday loan out, I could have used the money my partner gave me to completely clear my credit cards. But that's a valuable lesson I've learnt, taking out more debt is never the answer.

So now you can focus on the positives: if you're anything like me, you will never take a payday loan again - I've locked myself out of my accounts but I have honestly never been tempted to use them again, I feel sick when I think of what a financial pickle I was in. I can look at my bank statements without feeling ashamed now.

Another thing that helped me is that now I don't spend on my credit card, I just pay off a set amount that I can afford and that leaves me with enough money to get through the month. This then motivates me not to spend anything unnecessarily because then I can use the money to make overpayments on my CC (becoming debt free gets really addictive, trust me!) It feels really good to not have had to get my credit card out (I don't keep it in my purse either to avoid temptation).

I'm glad you're feeling more positive. If you were able to shift some/all of your credit card balance onto a 0% balance transfer card, that would help even more. I don't know if this is an option for you but if you currently have 'good' credit and haven't missed payments you may be eligible for a better credit card deal. Do you know what the interest rate is on the Vanquis card? Put it into the snowball calculator and see how much quicker you could pay it off at lower interest:

http://www.whatsthecost.com/snowball.aspx?country=uk

and most importantly, keep your chin up

debtfree12000

Hi

Well done for admitting you have a debt problem.

I too had myself in a similar cycle, it is such a pain! You tend to borrow more every month. My advice is to call stepchange debt charity, I cannot commend them enough, they have been my saviour! They really do know how to professionally help you.

So ensure you open a basic bank account, cancel all Continuous Payment Authorities with your bank etc... then work with stepchange. In my experience the payday loan companies are only happy to get back their loans even on a repayment plan. Luckily wonga is one that offers an option 3 days prior to the loan being due to create a payment plan. See if this helps, and please please try to not enter anymore credit agreements, it is so easy I can vow to that one.

All the best, let me know how you get on.

Cheers

Kev
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