£12,000 - best way forward.

m3kx

Hi everyone,

I'm not sure where to post this exactly as it covers debt, credit cards and loans!

I was wondering if you could help us, the debt I am looking to reduce is my mothers, but we are both unsure what the best option is.

She had been working full time but was made redundant, after that she worked part time for 2 years and has only recently managed to get a full time job (within the same company as the part time job). Going from full time to part time, meant she relied heavily on credit cards (she had debts previous to this also) but now going back in to full time employment, she is looking to make a fresh start on getting herself out of debt.

Currently she has 3 credit cards totalling £12,200. Just under £6000 of the debt is on a MBNA card, the rest is split between a Halifax card and Bank of Ireland/Post Office card. Initially we were looking at paying off only the largest debt (MBNA) as its payments are paying the interest and not the debt itself but we then starting thinking about the debts as a whole.

Looking at just the MBNA card we thought either a loan or credit card for £6000 as for all the debts, we were considering a secure loan on the mortgage for the full amount. Honestly we are not sure if this can be done with our mortgage but it was done previously (8 years ago) for her partners debts and made life a bit simpler for him.

Currently her monthly payments for all cards is about £350 which is a bit steep for her right now but do-able, I suggested if nothing else changing the MBNA card and actually paying of the debt would be a good start but we aren't sure how to go about it and if it is really the best thing to do.

So, do any of you have any suggestions or pointers for us? I would appreciate any info, as I must admit it is hard to know whats the best way to go.

Thanks in-advance.

sourcrates

Hi,

Sorry to hear about the problems your mothers having.

It would not be a good idea to borrow any more money to consolidate these debts, at some point you must draw a line in the sand, and say enough is enough.
My suggestion would be to contact National Debtline Scotland, and get some advice from them.

A debt management plan would probebly be the way to deal with this matter, that would involve working out a budget that she can manage on, without resorting to further credit, basically living within her means, then repaying what she owes at a lower rate than her normal repayments. usually over a longer period.

There are debt charities that manage these plans at no cost to you, stepchange, payplan, are just two of those.

Make the call and see what they advise.

utroi85

If you can sit down with your mother and complete a statment of affairs (hopefully someone will be able to post the link as I'm not allowed to yet) honestly, the people here can be really good at pointing out areas where savings can be made.

Once done post it back up and I am sure someone will come up with some helpful comments for you.

sourcrates

SOA calculator :

http://www.stoozing.com/calculator/soa.php

[Deleted User]

The usual advice. Post an SOA, so the good folk on here can advise on reducing spending, and the best way to pay off the debts.

http://www.stoozing.com/calculator/soa.php

under "Format results for discussion boards (optional)", click the "MSE" button, before Copying and Pasting into your post.

National_Debtline

Hi m3kx


I would suggest that the first thing to do should be for your mother to complete a Statement of Affairs http://www.stoozing.com/calculator/soa.php and post it in this thread if possible so that we can offer more informed comment on her options.


I'd exercise caution over adding such debts to the mortgage and thus turning them into extra secured commitments, at least until you've properly assessed all of the possibilities.


Dennis
@natdebtline

andyfromotley

If your mother doesnt pay the debts now, not a lot happens, if she cant pay the mortgage because its too expensive with the debts added then she will lose her house.

Turning unsecured debt into secured debt is a really bad idea.

Fear not though there will be a way out of this. Post an SOA and people will be able to advise the best way forward.

Nice one on helping your mum sort this mess out.

m3kx

Thank you everyone!

My only problem with an SOA is that our household bills are split, and her partner does not share any responsibility of these debts so his income is irrelevant to hers. She has limited bills, part share of the mortgage payments, does not drive nor take the bus and walks to work.

Monthly -
Income: £1030
Her contribution to Mortgage: £350
Food Shopping: £160-£170
Electricity: £62
Mobile Phone: £17
TV Licence: £12
Clothing or other extras: £40-£50 (estimate)
Debt Payments: £350

Total outgoing = £1011
Total leftover = £19

This ultimately is her SOA. She really does not have many extras, her money is for the home and bills, what her partner does not pay and what she does not pay - I do. She was getting digs from me but I am currently unemployed (no benefits) and am using any money I have to pay my part of the bills.

There are three adults in the household. We shop in Lidl once a week and pick up the odd thing in Sainsburys during the week, no eating out or take aways. She does not smoke, drinks perhaps a bottle or two of £5 wine a week.

She has no savings, no other assets. I should also say that most of the other bills in the home are looked after by myself mainly, I have made sure we are on the best internet/phone/tv/mobile phone deal for us and that our energy tariff is suitable. I have checked our council tax and we are in the correct band.

The mortgage is out of my control but I can tell you that the full payment is about £1000 per month, I believe we have just under £90,000 remaining with 11 years on it (this is including the secure loan placed on it by her partner). Her partner is on a higher wage than she is, so he pays a larger amount of the mortgage plus the council tax, home insurance and gas.

We are in Scotland so no prescription fees and she uses the NHS so no private healthcare. She doesn't visit the dentist as it is too far away to travel by bus. I cut and colour her hair at home.

I can't think of anything else to add. I don't know the specific interest rates on each card and I have checked her credit rating, there are no issues bar having the large debt. I would say we all live within our means, we have had rough times which is what brought us to this point... as I said I am unemployed (health reasons) and not claiming benefits, I have used all of my savings to keep us afloat but those are running very low now.

Extra things I've been thinking;
We've already claimed back any PPI she was due (several years ago now) and recently got £26 back from the AI scheme. Our last home was on a pay as you go meter so nothing to claim back there.


Edit;
I spoke to my Mum this morning and she is concerned that a DMP would affect her ability to get a mortgage in future, herself and her partner entered into their current mortgage later in life and may need to remortgage.

m3kx

A little bump to see if anyone has any suggestions for us?

Thanks

utroi85

I would say the luxuries of the bottle of wine or two may have to go - I've had to temporarily decuct beer from my life at the moment.

How old is your mother, does she qualify for a reduction on the TV License at all (this may be an issue with other adults living at the housr) and along with that does she have sky or cable ?

I would imagine some others would suggest looking at changing brands at the shop for example to bring down the food bill, I know it's Lidl and they are pretty low anyway but £170 does seem a lot just for one person (or does she buy all the food for the household ?)

The electricity does seem a bit high - is that monthly or quarterly - it may be worth changing some habits with lights and the water heater for example (is it a property with all electric heating ?) Also perhaps have a look at the possibility of switching electricity suppliers - may not help but it's probably worth a punt.

There are some good hints and tips around energy suppliers on the site (I can't link yet I'm afraid).

- looking at that in total I would suggest speaking to the National Debtline Scotland people.

m3kx

Hi, thanks for replying.

She is 58 so I don't think she is applicable for any reduction in TV license. She pays for the electricity, the supplier could be changed but it would have to be run by her partner who pays for the gas (and is happy with his payments..). Her partner is also awful for not turning off lights, plus he runs his large hut and tools from the electric (often does mechincal work from home). We have Sky but I pay for that.

The food bill is for three adults, sorry I should have said that in my post.

I think she is worried about either a DAS or DMP will have detrimental affects on her ability to apply for a mortgage in future, given her age and the amount of cash and time left in the mortgage this may be sooner rather than later. I don't know if remortgaging now is an option or worthwhile one if it is? I am trying to get her to discuss her debt with her partner but he is terrible at dealing with money and issues like this, he is more likely to bury his head in the sand than help.