Need help getting out of debt

Mack_and_Cheese

I've always been a bit of a debt denier and I'm admittedly poor with my finances. I knew myself and my wife were in debt but until I sat down recently and went in detail through my debts.

I have around £6.5k in a consolidation loan remaining - about 2.5 years left of a 4 year deal at £200pcm
My joint account regularly gets close to the limit of the overdraft - this limit has been extended a number of times. At worst, just before pay day its pushing £2.5k
I have my own personal overdraft in one current account that is very close tot he limit of £2.5k and a second current account close to the OD limit of £500.
I also have a credit card balance of £7.1k (its a 0% balance transfer and I'm paying the minimum - just shy of £145pcm)
An unexpected bill came up a few months ago and this meant I needed to get a £1k loan over 24 months at £45pcm (there is £840 remaining).
On top of this my wife is into an overdraft of of £1.8k and has a credit card balance of nearly £1k

The total debt is around £22.5k

We no longer have a mortgage to pay as we sold our house in order to buy with my inlaws, so we do have £70k but this is tied up in the property and as we are not in a position for my inlaws to remortgage there is little chance of gaining access to any of this.

For a little context, the debt built up when my son was born and my wife was on maternity leave. During this time I also moved to a lower paying job (before the other one killed me of stress) and once my wife returned she also moved to a lower paying job which had less hours so that she could stay at home and save us from paying childcare expenses.

I was aware that the debts were mounting, but I was always of the thought that I might get promoted (haven't been - industry as a whole is poorly paid) and that the reduction in our expenses after selling our home would pay off our debts.

It hasn't, and as such we are paying our £500-600 pcm on debt service alone with a post tax income of around £2.5k between us.

We live rurally so travel to work is by car (we both drive bangers which are fully paid off but cheap to run - there is no option of public transport to speak of) we have cut a lot of costs by changing deals but have found getting out of the debt is impossible. We have had one holiday in the last few years which my parents paid for.

I have also just written to my bank asking for a refund of £600 for charges over the last 6 years but I can't rely on that coming in!

With the debt spread out as is it, is the best thing to do to get a consolidation loan? We could reduce our payments down to £400pcm or is there a better option?

Strangely I checked my credit score and got 999! and still have £12,000 available on credit cards (a limit of £11,000 on a 0% balance transfer card). Is it possible to use one credit card to pay off an overdraft and then transfer that over the 0% card?

Further to this my wife is about to retrain and is aiming to get a business loan - If I go down the loan route should I make this a joint application? Would it be likely to be successful? Or would it be better to go for it in just my name?

Any help would be hugely appreciated. I've been a huge mug financially and I am working hard to fix it!

webnibbler

Hi

The first step is to understand your current financial position by doing a S.O.A (Statement of Affairs) which you can complete here.

Post the result on this board and people will be better able to help when they see your exact income and expenditure. Also this will begin to give you more insight into you current position.

National_Debtline

Hi Mack and Cheese,


I understand that a situation like this can be stressful and there is a desire to 'tidy up' the debts with a consolidation loan - but be careful. This rarely works for people and often people end up paying back much more overall because they pay interest on top of interest. From your post you seem to have had first hand experience with this because you have had a consolidation loan before, and as you can see, debt can still build up around this idea.


I would suggest you do a SOA and post it here. If you can maintain the minimum payments but want your money to have more impact then you need to try and overpay your debts where possible. It would also be beneficial to open a new basic bank account so you have full access to your income every month. There is a risk with this that if the bank does call in the overdraft and you can't pay it there and then, it could result in a default on your credit file and further enforcement action. But, it is a bit of a double edged sword, because banks can withdraw overdraft limits with very little notice, and if you live in your overdraft - this could be a higher risk. Start with a SOA and go from there. Good luck,


Laura
@natdebtline

Moneycoach

You have a mess on your hands, but there is light at the end of the tunnel and it's not an oncoming train!


1. You need to do a monthly budget or SOA and calculate EXACTLY what comes in and what foes out each month.


2. Make a plan to repay the debt by a given date with your income I would aim for no more than 2 years.
You make £2500 pm x 24 mths = £60,000. You should be able to clear £23k in debt with that.


3. No more consolidation loans and switching credit cards, so far that has not worked. The only way to get rid of debt is with money, not by moving it around


Why make this mess worse with a business loan?
Start the business with cash and start small...

Verbatim

If you can switch interest bearing debt to a 0% cc that will save you the interest. Be careful not to build up more debt but be focussed on reducing the total debt amount every month.
The point about overdrafts is pertinent. Perhaps prioritise reducing your overdraft?
Taking out a business loan to finance retraining sounds like a possible long term goal if your wife has researched likely income afterwards and knows it will be ecomonically viable. But at present it sounds as if the last thing you need is another debt. When would she have to start repaying it? Straight away or after she qualifies?

Mack_and_Cheese

Thank you everyone for your help and suggestions. Using the SOA has been particularly helpful in identifying how much we were sending out with nothing to show and we have used it to make some immediate and considerable savings with more coming soon too. As a complete plank when it comes to finance matters I am astonished how bad I had been.

We are no longer simply servicing debt which had snowballed unnoticed and we have a solid plan on reducing it with overpayments as a standard.

Thank you again for all your help! It has been much appreciated!

andyfromotley

1. reduce outgoings
2. increase income
3. start slaying that debt, on epound at a time.
4 consolidation is unlikely to work for you unti you have changed your ways.
5. plans for new business/retraining may have to go on hold until you have sorted out your finance. Particularly if it will result in a drop of income at the start.

There is no magic bullet for this. You built up the debt over a period of time and its not going to dissappear overnight. But £30k take home pay per year and no mortgage you really should be making big inroads into this, particularly if you can up your income with overtime/ second jobs/third jobs even. If you can both earn an extra £500 per month then you can really crack this debt in superquick time. So get to it!!

Moneycoach

Good luck, you can do it!