Advice on Working to Eliminate £23K loan and CC Debt

Hi,

Last summer, I was made redundant from my job. Before this, my credit was quite good, and my business was doing well.

However, since the redundancy, my debts have spiralled out of control, and my credit rating is now poor.

Then, three months ago, I was able to secure full-time employment with a very good salary. This salary enables me to pay my household expenses, which I have severely reduced...no extras whatsoever. However, I am still left with a £500 monthly shortfall due to a loan (left from divorce) and credit card payments. I admittedly mismanaged my money (a real understatement because I do know better!) and am now paying the price. I would very much like to pay these debts down, and am also currently looking for freelance work to supplement my FT income.

What I would like to do is try and obtain an unsecured personal loan for £23,000 over perhaps 10 years. I am a homeowner and pay my mortgage, but my husband is umemployed (looking for work) and I don't want his name on my personal debts.

Are any of you aware of lenders who are able to do an adverse credit, unsecured loan for this amount and time frame? I would like to do it for less, but I'm already paying about £500 per month on these credit card debts and loans. I'm paying £230 on my loan alone. I have an agreement in principle from Freedom Finance, but they're only willing to do seven years and I think the payments will be too high (they haven't provided me with an amount as yet).

Many thanks for any input you can offer.
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Comments

  • Debt_Free_Chick
    Debt_Free_Chick Posts: 13,276 Forumite
    Combo Breaker First Post
    This is a really bad idea. As you have seen, you are unlikely to secure a loan for the amojunt and term you require. In addition, you would be saddled with all that debt for the entire repayment period.

    You admit you are mismanaging your money. It seems that you may be living beyond your means. If you want, you can post your budget here and we can suggest how you can cut back.

    Re your home - could you downsize to release some equity? This may seem "risky" but there is a risk you could be made bankrupt - if you can't pay your debts and can't agree a payment plan with your creditors - so you could lose your home anyway.

    You really seem to have few options, just on the limited information you have posted. If you can post your budget then we may be able to help.

    You need to pay off your debt, not simply switch it from one lender to another. To do this, you need to get all your expenses down to the minimum and completely eliminate those that are not necessary. If you can increase your income, that would help too. Can't your husband get any paid work? Work in a supermarket, or a bar? Every little really will help. Do you have any junk you can sell on Ebay.

    We need more information, I think - but the new loan option is looking bleak.

    Please - don't deal with Freedom Finance. You'll get into deeper trouble when you find you can't meet the repayments. They are not easy on those who are late paying or miss payments altogether and it's not yet clear whether you can afford what they want.

    Let us have some more information.
    Warning ..... I'm a peri-menopausal axe-wielding maniac ;)
  • Iona_Penny
    Iona_Penny Posts: 697 Forumite
    First Anniversary Combo Breaker
    I agree totally with D-F-chick that you must not accept the offer from Freedom Finance and if you're stilltempted find out there t&c and interest rates and watch the shouts of alarm>

    £23000 is a large amount for an unsecured loan; Is it not possible to investigate remortgaging to include this amount? The interest rate would be better and though i know many people do not advocate this I think if you went for a fixed rate deal it would give you some security of payments. You are at least facing the problem. However this is only a solution if you DO NOT USE YOUR CREDIT CARDS again.

    It really would help if you posted your whole budget as there may be something you are missing - although £500 is a huge shortfall
  • Magentasue
    Magentasue Posts: 4,229 Forumite
    Also, the rates of interest for the loan you have and the credit cards. If your credit rating is poor, your options to transfer the balances to lower rate cards may be limited but it could be an option for when you have rebuilt your credit record.

    If you are able to reduce or freeze the interest on you debt AND cut back on your spending, the £500 shortfall could be reduced more than if you do just one of these.

    Have you contacted CAB, CCCS or National Debtline? (links at top of page)
  • After I posted this message, I continued calling around and talking with people about my situation as I realised that trying to get an unsecured loan for £23K was (1) an extremely bad idea, (2) not possible, and (3) not something I really wanted to do...more debt to cover debt. I'd like to share everything here...apologies if it's all a bit disjointed!

    That £23K of debt is what I've incurred personally through, yes, living well beyond means and making some stupid purchase decisions! I had a senior-mgt level job, and did entirely too much spending!!!

    Talked to those debt mgt companies...talking about a bunch of thieves!

    I finally decided to contact CCCS. I don't have an appt with them for a month, but they were able to give me good advice and what I should do in the meantime.

    With the salary I make, I have enough to cover my priority debts...my mortgage, council tax, etc.

    My husband and I sat down a couple of weeks ago to try and figure out where the money is going. In one month, we spent over £600 on groceries and alcohol alone! How foolish and ridicuous is that!

    He has also been looking for a job and is also taking some free courses through Learn Direct to improve some of his skillsets. He does some freelance work that allows him to cover his personal outgoings (student loan, cc bills).

    I'm on about £1,600 salary net, and I wanted to share with you my monthly outgoings, so here goes:

    Mortgage - £330
    Car payment - £160
    Council tax - $74
    Electric and gas combined - £80 (long story with Southern Electric...NEVER take on a supplier from those pain in the as* door-to-door sales guys!!! I ended up paying not enough for my gas and electric and they wanted to collect over £60 on each account to make up for the shortfall. They changed their tune real quick when I told them about the sales guy and that I was going to report their sales practices. They accepted £40 a month on each as I was spending £30 per month anyway.)
    Water - £70 every 6 mos
    Telephone/broadband/cable tv - £85
    Car insurance - £94 (looking for other insurers for cheaper rates)
    Home insurance - £35 - looking to reduce
    TV licence - £24.20 on DD
    Groceries - £200 (£50 per week for food, alcohol, cleaning supplies - making all means from scratch and taking packed lunch to work every day)
    Pet food - £50 (3 large dogs and 1 cat)
    Mobile phones (2) on 24 month business tariff - £50

    Then:
    Egg loan - £207
    Egg credit card - £39
    Natwest CC - £97
    Barclaycard - £50 (negotiated payment)
    Two catalogues - £69 (negotiated payment) + new minimum payment on 2nd at £105

    I've already applied for a new Current Account and was approved by A&L. They can also sort out my direct debits and close out my NW account as I've been told by at least 10 different financial people that NW sucks eggs and to get out ASAP.

    From CCCS's advice, I've cancelled any direct debits (loan and 1 CC) and will by phoning my creditors to put them in the picture. CCCS told me that if I have any problems to provide the creditors with my CCCS ref no. and offer to make a token payment, even if it's small. They will then help me sort everything out when I talk with them in June.

    I'm also planning to return some items of clothing to receive a refund. The one company allows you to return items at any time, no questions asked, and they already said they could issue me a cheque for those items. Just have to package them up and get them sent off.

    I already have an EBay account, so I'll be taking some pics this weekend and getting some jewellery online to sell.

    I've also been chasing around for some extra work. I'm on a contract with my current employer and just received a phone call from a company I've been chasing around for a few months with a strong possibily of getting an part time deal that would bring in around an extra £2600 a month. I just have to try and figure out if I can swing this somehow as I'm working FT and they want me in a couple of days a week.

    So, basically, this is what I've managed so far. I harp on my husband to shut off the lights and not light the whole house up. We're no longer buying ready meals and cooking everything from scratch. We're also planning to try and grow some veggies and lettuce and maybe look into getting an allotment to grow stuff on. Going to the cinema during the week as opposed to the weekends saves a fiver and two for one pub meals are awesome (we're lucky if we go out once a month!).

    Once he gets a job, it will start to make things a bit easier.

    Any way, thanks for listening and feel free to share any ideas, comments...etc. I want to get this sorted as quickly as possible, so I hope I'm taking all the right steps!
  • I forgot to add £100 per month on petrol.
    Car tax is £90 every six months.
  • Hi, been in very similar situation, and only by really reducing the expenses and maximising income can this be resolved.

    One item sticks out £85/month on phone/broadband/cable tv. Swithc to Tiscali for £15.99 month 1 mbps. Move phone calls to 18866.com for 2p per UK geographic call. That is 2 pence per call for 2 minutes or 2 hours with no monthly subscription. If you are on a bundled phone subscription of say £15 per month that means you would have to make 750 phone calls per month at 2p to make it worth while. Plus sacrifices have to be made, reduce your cable tv package to a lower subscription. As an example I pay about a tenner a month to BT for line rental, £3 a month to 18866 for calls, £15.99 to Tiscali for broadband and about £20 a month to Sky. My total is about £50 a month. £30 quid a month might not sound much of a saving but it is 37.5%!

    For a short term reduction in grocery bills try Lidl. When things were desperate, we shopped on a budget of £25 per week, with two toddlers! It is hard, but the quality on most items is good, you just dont get the choice or temptation to buy extravagant items.

    Try reducing your contracts on mobiles, or if you are exceeding your bundled minutes across networks, look at the 18866 website as you can use a 0208 number on your mobile to dial through the 18866 account to mobiles at 12p per minute.

    Would switching to the two days per week job on £2600 per month make more sense. You would increase your monthly income and have more time to contract elsewhere. Also you could get part time work, I know it's poor money in terms of what you are usd to, but bar work or shelf filling could give you an extra £150 a week. If you both did that another £300 per week between you would be £1200 per month plus your £2600 makes £3800 per month. Now that would solve your problems wouldn't it?

    Sorry if I sound like I am lecturing, but I have been there, with a lot higher debts, two toddlers, and only me able to work as childcare costs outstripped my wifes earning ability. By taking the exact same steps, we are out of problems, with money to spend, so I promise you it can work.

    Hope this helps.
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  • LaceyAllen
    LaceyAllen Posts: 9 Forumite
    Thanks a million for that! It all makes total sense, and I'm going to give it a go. I'm supposed to hear from the 2 day a week job, and in addition to my regular FT job, I've made another £100 doing a bit of work that took me a couple of hours. And, I'm going to be making a bit more for from this same little gig.

    I really appreciate all the great advice I've gotten here so far. Please keep it coming if you think of anything that might help.

    I have my CCCS phone appt on 13 June.
  • LaceyAllen
    LaceyAllen Posts: 9 Forumite
    Hi, been in very similar situation, and only by really reducing the expenses and maximising income can this be resolved.

    One item sticks out £85/month on phone/broadband/cable tv. Swithc to Tiscali for £15.99 month 1 mbps. Move phone calls to 18866.com for 2p per UK geographic call. That is 2 pence per call for 2 minutes or 2 hours with no monthly subscription. If you are on a bundled phone subscription of say £15 per month that means you would have to make 750 phone calls per month at 2p to make it worth while. Plus sacrifices have to be made, reduce your cable tv package to a lower subscription. As an example I pay about a tenner a month to BT for line rental, £3 a month to 18866 for calls, £15.99 to Tiscali for broadband and about £20 a month to Sky. My total is about £50 a month. £30 quid a month might not sound much of a saving but it is 37.5%!

    For a short term reduction in grocery bills try Lidl. When things were desperate, we shopped on a budget of £25 per week, with two toddlers! It is hard, but the quality on most items is good, you just dont get the choice or temptation to buy extravagant items.

    Try reducing your contracts on mobiles, or if you are exceeding your bundled minutes across networks, look at the 18866 website as you can use a 0208 number on your mobile to dial through the 18866 account to mobiles at 12p per minute.

    Would switching to the two days per week job on £2600 per month make more sense. You would increase your monthly income and have more time to contract elsewhere. Also you could get part time work, I know it's poor money in terms of what you are usd to, but bar work or shelf filling could give you an extra £150 a week. If you both did that another £300 per week between you would be £1200 per month plus your £2600 makes £3800 per month. Now that would solve your problems wouldn't it?

    Sorry if I sound like I am lecturing, but I have been there, with a lot higher debts, two toddlers, and only me able to work as childcare costs outstripped my wifes earning ability. By taking the exact same steps, we are out of problems, with money to spend, so I promise you it can work.

    Hope this helps.
    Were you able to get yourself out of the debt you had? Did you go with someone like CCCS? How are you getting on so far?
  • LaceyAllen
    LaceyAllen Posts: 9 Forumite
    I'm really excited, because the cost of groceries has done my head in for a long time. I just found the Lidl web site, signed up for their newsletter and found where the closest one to me is...just a couple of miles.
  • mountainofdebt
    mountainofdebt Posts: 7,795 Forumite
    First Post First Anniversary Combo Breaker
    A simple idea would be to draw up menu for the forthcoming week and buy only want you need for those menus....it will be amazing how many non-essentials you need otherwise

    The only other word of wisedom I can add is to sign up to 18866...I've gone from a £60+ a quarter bill to £31.55 in as many months.....I just wish I'd known about 18866 alot sooner!
    2014 Target;
    To overpay CC by £1,000.
    Overpayment to date : £310

    2nd Purse Challenge:
    £15.88 saved to date
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