just starting our journey

Squeezyrider

I'm big enough to admit that over the years we lived beyond our means. We went to events we couldn't really afford and built up debt on credit cards. For a while I was travelling a lot for work and racking up expenses on cards that I was meant to pay back once I'd claimed them. This was easier said than done.

I'm not expecting anyone to feel bad for me as I say my eyes were open at the time.

However we're not those people any more we've never missed a payment because we couldn't afford it but we've reached the stage where we've both got pretty good incomes but most of it is servicing debt.

So it's time to start tackling the problem.

We have around £20000 of unsecured debt most of it credit cards. We applied for a loan with the bank which was referred then ultimately declined. This loan would have seen us debt free in 4 years. I can understand their reasons for declining us ( basically they don't know that we won't just start spending on cards again) but at least we know now where we stand.

I'd be really grateful for any advice. For example we have a lot of piddly little debts on different catalogues. Will it help us to put these small debts onto the credit cards or should we tackle them directly.

There's two goals here I guess

Our goal ultimately is to move house but we need to get the debts down and our risk down first.

The second is to be debt free (exc mortgage). We need to reduce the actual debt without imapcting our credit rating. I heard somewhere that having credit available to use but not using it looks better than than reducing your credit limits or closing accounts is this true?

Anyway sorry for the life story but any advice you can give will be greatly appreciated.

its_maths_not_magic

Welcome to the forum!

I would suggest the first thing you do is get all your debts together, sit down and write up your statement of affairs (SOA) so you know your current situation. From there you may want to contact the National debt helpline as they can give you the best advice on how to move forward - not only are the staffed by really lovely and helpful people but to contact them is entirely free, even via phone. You can find both how to do the SOA and national help line in the last sticky on this thread.

You can also post your SOA here (start a new thread) and people will go over it and offer you suggestions for ways to cut down your spending. Also have a look around as this website is a great resource. There are brilliant budgeting tools, information on almost any financial topic as well as the great advice from the people on these boards.

longtermplanner

Squeezyrider wrote: »

For example we have a lot of piddly little debts on different catalogues. Will it help us to put these small debts onto the credit cards or should we tackle them directly.

The first thing you need to do is make a complete list of all your debts, the amounts owing, the monthly minimum payments and the interest rates.

The only point in shuffling debt is to reduce interest. If you have 0%s on credit cards available, use those to clear off the highest interest debt. But otherwise it's not worth trying to shuffle debt around.

In a way its good to have a few piddly debts around, because it means you are going to have something to celebrate soon when the first of them is gone!

We need to reduce the actual debt without imapcting our credit rating. I heard somewhere that having credit available to use but not using it looks better than than reducing your credit limits or closing accounts is this true?

That depends how much credit yiou have available and how much debt you have, There is no simple equation because each lender has their own scoring.

Paying off small debts is good because future lenders can see that you are getting rid of debts.

I would say at the start the best thing is to close every account that you clear. If it is a credit card, call up and say you want to close unless they can give you a 0% offer.

You say you have been turned down for a large consolidation loan. The other thing you could do is wait a few months and apply for a small loan. even 4k of debt shifter from a credit card onto a much lower interest is going to help.

(I am assuming here that you CAN afford the minimum monthly payments. If you can't then you need a Debt Management Plan and this will trash your credit rating. But if this is the only way forward, then it is what has to heppen.)

Anyway sorry for the life story but any advice you can give will be greatly appreciated.

Main piece of advice - spend less time thinking about your rating and more time on budgetting. Have you looked at YNAB? It is a great piece of budgetting software. Unfortunately it's not free, but you can try it for a month and personally I think it's worth every penny of the £30 odd that it costs.

Divingmad

Hi Squeezy,
Welcome to MSE.
When working out what you owe and to whom, make sure you have all the paperwork to hand so that the amount owed and interest rate are available. Usually, most people advise getting rid of the ones with the highest interest first whilst making minimum payments on the rest.
Also, gather up all your receipts for the last month (and more if you have it) and work out just how much you are spending on other items, post this in your SOA and the great folk on here will be able to tell you where you can reduce your outgoings.
Once you have all the figures, you can start looking at a snowball calculator, which will give you an estimate of when you can expect to pay all your debts off and be debt free.
Look forward to seeing how you get on,
Regards
DM

asparagus1968

hi and welcome.
as above, and here is the link to the statement od affairs, good luck
http://www.stoozing.com/calculator/soa.php

moohound

Not getting the loan might be best think that could have happened, consolidation can make you worse off if you are tempted to spend on the card and overdraft again.

Snowballing might be the way to go, paying off the debts with the highest interest first. Although getting rid of the very small debts might help with motivation, because its not all just about the numbers, becoming debt free and staying debt free is about changing the way you think about money as well as the practicality of budgeting and doing the sums.

The very best of luck with it, it really is a roller coaster and you will have bad days when it seems like an endless grind,and good days when you feel like you are making real progress, but the freedom from debt at the end is more than worth it.

Dobbibill

Hi Squeezyrider,


Welcome to the forum and well done on taking the first step to post on here for help and support. :wave:


I agree with other posters here that not getting the loan has probably been a blessing in disguise and given you your LBM. :idea:


If you post a SOA as suggested, plenty of the more experienced DFW's will spot anywhere you can make savings on bills/expenditure.


Snowballing is the way to go. You mentioned lots of piddly little debts on catalogues, which when snowballing some people find clearing a smaller debt gives a massive boost of confidence as it's one down, X amount to go. Just find the best way for yourself, circumstances and lifestyle.


The snowballing calculator can be used to see how long it will take to be debt free. You can calculate it either by balance or interest rate (usually highest interest rate debt 1st to make the best of every penny that goes on it)........... here's the link..........
http://www.whatsthecost.com/snowball.aspx


Well done on taking the first steps to reaching your goal. :money:


Wishing you all the best :T :T


DB

Squeezyrider

Thanks Guys.

I'll have a look at filling out the SOA tonight. It should be fairly starightforward as we gathered up a lot of that info when we were applying for the loan.

We're able to make the monthly payments and I've reduced the CC limits so that we can't spend on them.

I'm considering changing bank to First Direct as they have a £125 cash offer for transferring.