Need help with a decision

LewisUK

Good Day Everyone,

I'll start off with a little background:
My partner has just finished teacher training and has her NQT job for September lined up, I have just finish my degree at the OU and start teacher training in September (Salaried). We have 2 children who are 2 and 6.

Our current predicament:
We have about 15k worth of debt which is becoming increasing difficult to pay. It is made up of:
£600 Mastercard
£3900 Barclaycard
£7900 Barclaycard
£200 Next
£1700 Overdraft
£90 Argos

At the moment we are struggling as my partner's student finance was last paid in April and she is currently doing as many hours as possible at Domino's. I work as an unqualified teacher (£19500 p/a) until my course starts in September.

So from September, our income will be £38,700.

My question is: We would like to consolidate the 15k debt (we have a mortgage of 110k, house is worth 149k) and have a single payment (we understand that the total interest my be higher).
We have a few options.
One is that we take out a secured loan of 15k over 10 years which is £278 a month and total repayable is £33,500. We can overpay this without penalty.

Second option is that we borrow 15k on our mortgage (37 years left) and pay an extra £60 a month on the mortage. Our current mortage is £468 a month and will go up to £528.

Final option is that my mum lends me 15k and I pay back £250 a month interest free. This means debt free in 5 years. She is happy to lend us the money and £250 is less than we are paying on just the two credit cards.

Our finances are (finally) in order now and we will struggle to get through August and September if we don't act, not to mention the future with the credit card interest.

Also, we used to have a fantastic credit rating but in 3 years it has gone to 1/5 on Noddle.

In September we will be paying £768 a month on Nursery fees and are unsure how our tax credits will help with this, so if anyone can share their experiences, please can they let me know, in the previous tax year our income was about £19,000.

Thank you

DCFC79

Your credit rating even at a 1/5 means nothing, it can be a representation of your file but that's it, lenders don't see it.

Is going down the secured loan route a good idea, a bit risky me thinks.

LewisUK

I know the 1/5 means nothing, but I know our rating is not good!
My mum said she would rather lend us the money instead of being £33000 in debt.

Do you mean borrowing more on our mortgage?
The *only* problem I have with this is that our mortage company value our house at £149,090. We bought it for £125,000 in Dec '13. I can't understand how they got to that figure but it's good for us. I'm worried about borrowing the extra 15k. Then our mortgage will go up to £125k (at least).
We are on a fixed rate until 2020 and I don't want to be in negative equity.
I'm just sceptical about Lloyds' valuation of my property (4 bed semi).

Thanks

glennstar

As usual, I agree with DCFC79. You appear to be considering a high risk strategy with little chance of success. I can't help wondering why you have all this debt (I mean the underlying reasons - I obviously know how it is possible to rack up debt on low friction sources of credit) and what makes you think that consolidating it will not just lead to the same situation arising in the next year or 3.

DCFC79

Yes going secured loan/adding to the mortgage isn't wise.

Your both starting new jobs in September so a big risk if you find it hard to find work. I'd get the loan from your mother.

If you have corrected the cause why you spent the money you did on the cards then it would work. When you pay the cards off cut them up and close the accounts.

GwylimT

Have you looked at a snowballing calculator?

When was the last time you added to your debts?

At the moment how much are you paying per month on your cards etc?

LewisUK

We've needed to get by - the idea was to create a platform so we can start our careers with stability (haha).
My partner starting her new career has been challenging but we are now settled. If we can get through Aug and Sept we will be better.
My degree is maths so I will have a job in teaching (worked for 5 years as UQT so I know how tricky the job is lol!).
My OH has an NQT job which is always a year.
I understand there is a risk.
Once we are both teaching we will have surplus of £655 per month (assuming I'm paying my mum £250 a month).
If we take the mortgage option we are £845 surplus a month.
When I say surplus, that is everything paid for inc. food, petrol etc.
Currently I'm paying:
£117 for the £3900 card
£180 for the £7900 card
£20 for £600 card.
£32 for the OD.

Total is about £350 per month.

Thank you guys

GwylimT

So why would you only be paying £250 a month towards your debt?

At the moment are you paying the minimum payment for each debt?

LewisUK

My mum said she'll be happy with 250 a month back. In a couple of years we will increase the payment (when the youngest isn't at Nursery).
Yes the minimum payments, that is all we can afford at the moment.

Thank you

Dobbibill

I would be very cautious before turning unsecured debt into secured debt. Keep your mortgage payments as low as possible and if the worse were to happen a few years down the line, you are tasked with finding a minimal amount.

The other thing to consider is why you have the debt. If you don't acknowledge and address the problem, it will recur again. This is also why consolidation rarely works, it frees up the lines of credit and then they are reused, even when the best intentions are not to use them, life has a knack of throwing a curve ball right in the middle of things.

I agree with DCFC79, don't concern yourself with the credit score, only you and Noddle are aware of this.

You don't say how the debt is split. Who has what debt in their name? Have you looked at a 0% BT deal? Have either of you applied/been declined?

poppasmurf_bewdley

LewisUK wrote: »

Good Day Everyone,

I'll start off with a little background:
My partner has just finished teacher training and has her NQT job for September lined up, I have just finish my degree at the OU and start teacher training in September (Salaried). We have 2 children who are 2 and 6.

Our current predicament:
We have about 15k worth of debt which is becoming increasing difficult to pay. It is made up of:
£600 Mastercard
£3900 Barclaycard
£7900 Barclaycard
£200 Next
£1700 Overdraft
£90 Argos

At the moment we are struggling as my partner's student finance was last paid in April and she is currently doing as many hours as possible at Domino's. I work as an unqualified teacher (£19500 p/a) until my course starts in September.

So from September, our income will be £38,700.

My question is: We would like to consolidate the 15k debt (we have a mortgage of 110k, house is worth 149k) and have a single payment (we understand that the total interest my be higher).
We have a few options.
One is that we take out a secured loan of 15k over 10 years which is £278 a month and total repayable is £33,500. We can overpay this without penalty.

Second option is that we borrow 15k on our mortgage (37 years left) and pay an extra £60 a month on the mortage. Our current mortage is £468 a month and will go up to £528.

Final option is that my mum lends me 15k and I pay back £250 a month interest free. This means debt free in 5 years. She is happy to lend us the money and £250 is less than we are paying on just the two credit cards.

Our finances are (finally) in order now and we will struggle to get through August and September if we don't act, not to mention the future with the credit card interest.

Also, we used to have a fantastic credit rating but in 3 years it has gone to 1/5 on Noddle.

In September we will be paying £768 a month on Nursery fees and are unsure how our tax credits will help with this, so if anyone can share their experiences, please can they let me know, in the previous tax year our income was about £19,000.

Thank you

The first statement I have highlighted in bold tells me that the second statement I've highlighted is not true.

What have you done to ensure you do not run up any more credit card bills if you get these sorted out?