Managing Debt + Paying it off

soutermon

Hi folks,

Firstly, apologies if I am in the wrong forum/thread!

I’m looking for some advice on the best way to clear my debts as quickly as possible without causing too much damage to my credit rating. With a wedding and having a baby in the last 16 months, I’ve amassed some debt that I really shouldn’t have. Any advice would be greatly appreciated.

As things stand, I have am rated as Excellent in Experian with a score of 960, but can’t get a loan or new card as I have too much debt outstanding to be considered. I had thought of a consolidation loan to reduce interest/monthly payments, but that’s out of the window for now.

My take home pay every month is just shy of £2k, but I sometimes get offshore which increases my pay (due roughly £1600 at the end of next month on top of my salary). It goes without saying that any offshore pay will go into paying off the debt, but there is no guarantee of offshore time. My wife is currently on Maternity leave, and between maternity pay, child tax and child benefit from her pervious partner, she gets roughly £800 per month.

There are 3 HMRC debts for overpayment of Child Tax, but these are interest free and shouldn’t affect either of our credit rating, so they are far down my list of priorities for now.

Details of my debts :

Barclaycard - £5450 owed with £6150 limit, min £120 monthly payment and interest of 19.9%
Clydesdale Bank Overdraft - £2000 limit pretty much used up
Lloyds - £540 owed with £1650 limit, min £20 monthly payment and interest of 19.9%
Clydesdale Bank Loan - £2400 remaining, payments of £160 per month with roughly 2 years remaining

Details of my wifes debts
TSB Overdraft - £2000 limit, again used to its fullest
TSB Credit Card - £1500 owed, £1650 limit, £30 per month payment, 19.9% interest
Argos - £550 owed, £20 per month minimum
HMRC - £1000 owed @ £30 a month
HMRC - £240 owed @ £20 a month (I pay this by Direct Debit)
HMRC - £3000 owed @ £50 a month (I pay this by Direct Debit)
Car – 4 years left @ £110/month (I pay this by Direct Debit)

We are looking to buy a house in the next few years (I have deposit money that can’t be touched right now, otherwise I’d be using this!), and with me being the main bread earner and no guarantee my wife will go back to work after her maternity leave is up, I figure it best to clear all debts in my name.

If I were to take out a debt management plan, how would this affect my credit rating? I understand that whilst paying it off, I could not get credit, but will my credit rating return to normal once paid off? They idea of reducing interest on payments etc and saving money (thus paying off the debt quicker) is one I like, but not at the cost of damaging my credit rating.

Thanks if you even took the time to read this, let alone help!

Skinnylatte

Hi, well done on making that decision. The best thing I did when starting to clear my debts was to complete a statement of affairs and post it on here.
http://www.stoozing.com/calculator/soa.php
I used old bank statements to work out how much I spent on everything, and then started to keep a spending diary so I could see when my spare money was going,
The very best of luck

~Beanie~

A DMP will definitely damage your credit rating for 6 years at least, it won't suddenly return to normal once everything is paid off, the defaults etc will still show.

As the abve poster says, posting an SOA will probably be a good starting point and people will be better placed to help you.

soutermon

Thanks Skinnylatte and ~Beanie~. I'll have a sit down tonight and try and get a SOA posted up.

I did think I wasn't understanding the DMP properly. Rules that out then!

soutermon

Hi,

SOA from stoozing below. It's worth pointing out that any offshore cash I get will go straight towards the debt (I have £1600 on top of next months wage coming).

Any advice or pointers would be hugely welcome. Thanks in advance

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 1900
Partners monthly income after tax....... 540
Benefits................................ 135
Other income............................ 128
Total monthly income.................... 2703

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 390
Rent.................................... 340
Management charge (leasehold property).. 0
Council tax............................. 145
Electricity............................. 48
Gas..................................... 20
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 15
Mobile phone............................ 110
TV Licence.............................. 15
Satellite/Cable TV...................... 32
Internet Services....................... 10
Groceries etc. ......................... 650
Clothing................................ 50
Petrol/diesel........................... 40
Road tax................................ 25
Car Insurance........................... 25
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 60
Childcare/nursery....................... 0
Other child related expenses............ 42
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 30
Buildings insurance..................... 0
Contents insurance...................... 10
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 50
Haircuts................................ 10
Entertainment........................... 50
Holiday................................. 0
Emergency fund.......................... 0
Random DDs.............................. 40
Craig Overdraft......................... 15
Michelle Overdraft...................... 30
Total monthly expenses.................. 2252


Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 2000
Other assets............................ 3000
Total Assets............................ 5000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 0........(0)........0
Hire Purchase (HP) debt ...... 120......(20).......0<
HMRC...........................280......(20).......0<
HMRC...........................1000.....(30).......0<
HMRC...........................3000.....(50).......0<
loan...........................2600.....(160)......4<
Car............................4500.....(110)......4
Total secured & HP debts...... 11500.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
barclaycard....................5450......120.......19.9
lloyds.........................550.......15........19.9
tsb michelle...................1500......30........19.9
debenhams......................500.......15........20
argos..........................550.......15........20
Total unsecured debts..........8550......195.......-


Monthly Budget Summary
Total monthly income.................... 2,703
Expenses (including HP & secured debts). 2,252
Available for debt repayments........... 451
Monthly UNsecured debt repayments....... 195
Amount left after debt repayments....... 256

Personal Balance Sheet Summary
Total assets (things you own)........... 5,000
Total HP & Secured debt................. -11,500
Total Unsecured debt.................... -8,550
Net Assets.............................. -15,050

Created using the SOA calculator at https://www.stoozing.com.
Reproduced on Moneysavingexpert with permission, using other browser.

pmd123

you appear to have missed the £390 of secured & HP payments out of your monthly outgoings, meaning your £256 left over after debt repayments should be -£134.

First thing that sticks out to me is £650 per month on groceries, this is way way too high for 4 of you.

soutermon

The £390 of secured and HP payments is in the monthly outgoings already, unless I'm misunderstanding something?

£650 probably is too high, but I didn't want to sell myself too short. I'm hopeful we can get that down to more like £400-£500 once we are better at budgeting on groceries.

Of all the debts, am I best paying off the Barclaycard first and foremost? My understanding is that I should target the biggest debts first, is this correct?

Also, as we are saving for a house, and I'll likely be the one applying for the mortgage, am I best to eliminate all my debts first and worry about my wifes after? We'd still be paying the minimum required for her debts, but any extras would go towards mine.

pmd123

Apologies, I missed it up at the top.

£110 for mobiles, this should be able to come down, how long are left on the contracts? have you tried calling to move onto a lower tariff?

£50 per month on clothing seems high, I'd be reducing this to £20 while clearing debts.

Can you shop around for cheaper pet insurance? seems pretty high, how many pets does this cover?

Do you find you regularly have £250 over each month? if that is not the case, then you probably have additional expenses you have not thought of yet. Best to try to identify where the money ends up.

soutermon

That's for my own, my wifes and my daughters mobiles. My contract is nearly up, so I'll be going for a sim only contract shortly, saving me around £30 per month (this pains me as I am a gadget freak and HAVE to have the latest phone!). My wifes contract may be able to be reduced also.

We have 3 cats, and each are around the £10 mark with Sainsburys insurance. I was wary of cheaper quotes when I signed up as I'd read reviews saying a lot of them were almost impossible to claim from. Maybe time to re-check this. A quick look shows I can et all 3 insured for £10 a month, so a possible £20 saving again.

The £50 on clothes was a complete estimate. It's difficult though, as we have a 5 month old and 10 year old daughters who are constantly growing!

To be honest, it's only really this month I've realised how bad I've let the situation get. We've basically been using all our cash, and it then becomes tight at the end of the month. Cutting back on some things should see that improve though. For instance, I listed "Random DDs" in my SOA, and I think these are just technology insurance payments I can cancel.

Feeling better already, as with the above alone I could possibly save myself £90 a month!

Stooz

phones and sky. You cant just sit there with debt issues and enjoy luxuries at the same time.
SELL (yes SELL) the fancy handset and get several hundred off a credit card asap.

whats the random £60 travel?
also £50 a month on clothes sounds like a LOT. I wouldnt spend that a year.
I have freesat( uses the sky dish) and a giffgaff sim card that rarely costs me £5. They also pay out each 6 months by helping in the forums or pimping out sim cards. oh, calls between each other (wife daughter) are free. I made £40+ at xmas. Thats covered my bill for 8 months...

hollibobs_2

Hello and welcome

My first reaction was £650 a month on food :eek: I feed a family of four..two adults and two teenagers... For around £50 a week,this includes packed lunches for three everyday ..it can be done..

Download the app my supermarket and compare where to shop..I'm an aldi girl

The next would be mobile phones... If your daughter is on O2 or tesco mobile or even her phone is unlocked then giffgaff are brill, no contract,can change what you need every month and calls are free and texts to other members ...

I also very rarely use my debit card, I withdraw cash on a Monday and it has to last .

Good luck :T