Sudden Spike in Debt - Options?

Sprogladite

[FONT=Calibri,Arial,Helvetica,sans-serif]We are looking for some advice surrounding a remortgage/additional borrowing on the back of an (expensive) wedding and several untimely costly car/house repairs if this is something you may be able to offer advice on.

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We have accrued a substantial amount of unsecured borrowing across three credit cards and two overdrafts of 22k (a third of which is on a 0% balance tranfer card), however have good standing in terms of current LTV of 53% and increased single income (from myself) at £34k. My wife contributes £250 a month to chip away at the snowball however is on a part-time income and within 6 months of having cleared an IVA so this is not set to increase.



We have expendable debt repayment surplus of £500 per month however would not be averse to additional borrowing on the existing mortgage (25k decreasing LTV to 59%), even given the potential increase in interest over the remaining 29 year, 2 month term. We are keen to maintain current quality of life - if that makes sense - with the notable exception of dipping into the credit cards once the debt is under control.


I would be keen to undertstand the generic position we are in in terms of borrower reputation, alongside making the best consciencious desicion as to how best shift/pay off this substantial shortfall.

I Fully realise that this is not a totally dire situation and fully accept that our worry may be negatively inverse to the reality of the situation, however would appreciate any feedback or comments as to the best way forward, if you were in our position, as it were.


Thanks in advance,

Sprogladite
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Sanctioned_Parts_List

At least one of those debts can't exactly be described as "sudden," and you are going to have to learn to keep an emergency fund to pay for home and car breakdowns if you want to get and stay debt free. This will mean learning to save and not spend every last penny on your "quality of life" whichever way you approach your debts.

While simply transferring from unsecured debt in the form of credit cards and overdrafts, to secured debt, in the form of your mortgage, makes the credit cards and overdraft go away, you will still be an additional £22k (plus arrangement fees) in debt. You have not paid it off, just moved it. Plus you're risking where you live on your ability to keep paying for the next 30 years.

Moving debt from CC to mortgage is not controlling your debt, it's hiding from it.

fatbelly

It's moving the debt to a more dangerous place. Think about the IVA that you (or just your wife?) has come out of - that can only deal with unsecured debt as the secured lender has the right to take possession of and sell the property it's secured on.

Try running your whole situation past National Debtline, or post a statement of affairs on here.

Muttipops

Hi,
You may end up in a dire situation if you fall back on the making unsecured debt into secured debt option.
It is a have fun today and pay for it tomorrow mentality, but then you pay for it tomorrow and tomorrow and tomorrow.
Imagine what life is going to bring to you yet, possibly children, aging relatives, redundancy, ( because no one is immune), unexpected things. You can't keep putting it on the mortgage.
On this forum people are always talking about the light bulb moment, that moment when you realise that this can't go on and that you have to do something about it. I think you have had a half a light bulb moment, you are wanting to do something about it, but you still want the good standard of life. We all do, but somewhere along the line you have to pay for it.
Have you looked at your monthly expenditure? Can you cut down on non essentials, get better deals for your utilities, shop at Lidl's, find ways of having fun without spending huge amounts, in other words, use your money wisely so that you get the most out of your income without borrowing.
I had a lifestyle like yours and was then made redundant from an industry that was dying out. That is when all that debt comes and finds you. I have just become bankrupt.Believe you me, the road to bankruptcy is often long and painful. I wish with all my heart that I hadn't just thought of today, but of my future.


I just realised that i have been no help with giving you exact advice about how to go about getting this current shortfall sorted. I am just worried that you are starting on the road to problem debts. You may have it in hand, but please think very carefully about this next move, which I can see you are doing or else you wouldn't have asked a question on here.
And please excuse the doom merchant I probably sound. Only you know your circumstances, but your future is yours to guide and a future of debt is not something you would wish on your worst enemy.
Good luck in sorting things out.

Muttipops

LOL, whilst I was writing my short essay, fatbelly had replied in the meantime. He said in a couple of sentences what it look me all that waffle to say. A lesson in cutting the crap and getting to the point!

sourcrates

Muttipops wrote: »

LOL, whilst I was writing my short essay, fatbelly had replied in the meantime. He said in a couple of sentences what it look me all that waffle to say. A lesson in cutting the crap and getting to the point!

Sometimes people need to hear the long version though.

Good post, and a useful lesson on how things can fall apart extreamly quickly !!

Sprogladite

Statement of Affairs and Personal Balance Sheet

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

Monthly Income Details
Monthly income after tax................ 2100
Partners monthly income after tax....... 250
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2350

Monthly Expense Details
Mortgage................................ 560
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 120
Electricity............................. 40
Gas..................................... 40
Oil..................................... 0
Water rates............................. 20
Telephone (land line)................... 0
Mobile phone............................ 15
TV Licence.............................. 11
Satellite/Cable TV...................... 0
Internet Services....................... 34
Groceries etc. ......................... 200
Clothing................................ 50
Petrol/diesel........................... 150
Road tax................................ 20
Car Insurance........................... 35
Car maintenance (including MOT)......... 20
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 10
Contents insurance...................... 10
Life assurance ......................... 20
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 0
Entertainment........................... 50
Holiday................................. 0
Emergency fund.......................... 20
Total monthly expenses.................. 1425


Assets
Cash.................................... 0
House value (Gross)..................... 271007
Shares and bonds........................ 0
Car(s).................................. 500
Other assets............................ 0
Total Assets............................ 271507


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 146000...(560)......1.75
Total secured & HP debts...... 146000....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
MBNA...........................9200......205.......18.9
Halifax........................5800......54........0
Santander......................2800......125.......18.9
Natwest O/D....................1800......0.........1
Santander O/D..................2500......0.........1
Total unsecured debts..........22100.....384.......-


Monthly Budget Summary
Total monthly income.................... 2,350
Expenses (including HP & secured debts). 1,425
Available for debt repayments........... 925
Monthly UNsecured debt repayments....... 384
Amount left after debt repayments....... 541

Personal Balance Sheet Summary
Total assets (things you own)........... 271,507
Total HP & Secured debt................. -146,000
Total Unsecured debt.................... -22,100
Net Assets.............................. 103,407

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

Karonher

Just a couple of points.

If you have a child do you not get child benefit?

Do you really never buy any presents for anyone?

Do you never have haircuts?

Without knowing about the cars, the costs apart from petrol seems low.

It seems that you have a good surplus but is that actually in the bank at the end of the month? If not you could both keep a spending diary for a month at least and see what is being spent that you are not accounting for.

nkkingston

Are you actually paying your insurances at a rate of £10 a month or have you divided the annual cost? And if you've divided the annual cost, are you actually putting aside £10 a month towards them, or just assuming it'll all work out when the renewals come round?

Same with the emergency fund: is that something you're actually doing? If so, why do you have £0 cash assets?

Do you really never buy presents for anyone, or go on holiday, or cut your hair? Is your child genuinely costing you nothing? I mean, I assume you clothe them, but there's no accounting for that on there either.

I have a strong suspicion this is a wishlist SOA, not an accurate representation of what you're genuinely spending. Get out the last three months on bank statements and work out what you're actually spending. Then you'll know how much you've got to overpay debt.

Sprogladite

Thanks for your feedback. Wholeheartedly agree with the points raised; my wife receives child benefit however of course I contribute towards LO's care through splitting the groceries/clothing (food/nappies etc.). Perhaps I should split this out for the purposes of this demonstration (which is very valuable)

The Contents/Buildings insurance is ~£20 a month, yes have split this.

No haircuts, Mrs is very, very good indeed!

I have added childcare as myself and Mrs will be splitting the cost of this once LO starts nursery:

Statement of Affairs and Personal Balance Sheet

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

Monthly Income Details
Monthly income after tax................ 2100
Partners monthly income after tax....... 250
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2350

Monthly Expense Details
Mortgage................................ 560
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 120
Electricity............................. 40
Gas..................................... 40
Oil..................................... 0
Water rates............................. 20
Telephone (land line)................... 0
Mobile phone............................ 15
TV Licence.............................. 11
Satellite/Cable TV...................... 0
Internet Services....................... 34
Groceries etc. ......................... 180
Clothing................................ 50
Petrol/diesel........................... 150
Road tax................................ 20
Car Insurance........................... 35
Car maintenance (including MOT)......... 20
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 30
Other child related expenses............ 15
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 10
Contents insurance...................... 10
Life assurance ......................... 20
Other insurance......................... 0
Presents (birthday, christmas etc)...... 12
Haircuts................................ 0
Entertainment........................... 50
Holiday................................. 20
Emergency fund.......................... 20
Total monthly expenses.................. 1482


Assets
Cash.................................... 0
House value (Gross)..................... 271007
Shares and bonds........................ 0
Car(s).................................. 500
Other assets............................ 0
Total Assets............................ 271507


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 146000...(560)......1.75
Total secured & HP debts...... 146000....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
MBNA...........................9200......205.......18.9
Halifax........................5800......54........0
Santander......................2800......125.......18.9
Natwest O/D....................1800......0.........1
Santander O/D..................2500......0.........1
Total unsecured debts..........22100.....384.......-


Monthly Budget Summary
Total monthly income.................... 2,350
Expenses (including HP & secured debts). 1,482
Available for debt repayments........... 868
Monthly UNsecured debt repayments....... 384
Amount left after debt repayments....... 484

Personal Balance Sheet Summary
Total assets (things you own)........... 271,507
Total HP & Secured debt................. -146,000
Total Unsecured debt.................... -22,100
Net Assets.............................. 103,407

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

cms-help

Sprogladite wrote: »

Thanks for your feedback. Wholeheartedly agree with the points raised; my wife receives child benefit however of course I contribute towards LO's care through splitting the groceries/clothing (food/nappies etc.). Perhaps I should split this out for the purposes of this demonstration (which is very valuable)

The Contents/Buildings insurance is ~£20 a month, yes have split this.

No haircuts, Mrs is very, very good indeed!

I have added childcare as myself and Mrs will be splitting the cost of this once LO starts nursery:

Statement of Affairs and Personal Balance Sheet

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

Monthly Income Details
Monthly income after tax................ 2100
Partners monthly income after tax....... 250
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2350

Monthly Expense Details
Mortgage................................ 560
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 120
Electricity............................. 40
Gas..................................... 40
Oil..................................... 0
Water rates............................. 20
Telephone (land line)................... 0
Mobile phone............................ 15
TV Licence.............................. 11
Satellite/Cable TV...................... 0
Internet Services....................... 34
Groceries etc. ......................... 180
Clothing................................ 50
Petrol/diesel........................... 150
Road tax................................ 20
Car Insurance........................... 35
Car maintenance (including MOT)......... 20
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 30
Other child related expenses............ 15
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 10
Contents insurance...................... 10
Life assurance ......................... 20
Other insurance......................... 0
Presents (birthday, christmas etc)...... 12
Haircuts................................ 0
Entertainment........................... 50
Holiday................................. 20
Emergency fund.......................... 20
Total monthly expenses.................. 1482


Assets
Cash.................................... 0
House value (Gross)..................... 271007
Shares and bonds........................ 0
Car(s).................................. 500
Other assets............................ 0
Total Assets............................ 271507


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 146000...(560)......1.75
Total secured & HP debts...... 146000....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
MBNA...........................9200......205.......18.9
Halifax........................5800......54........0
Santander......................2800......125.......18.9
Natwest O/D....................1800......0.........1
Santander O/D..................2500......0.........1
Total unsecured debts..........22100.....384.......-


Monthly Budget Summary
Total monthly income.................... 2,350
Expenses (including HP & secured debts). 1,482
Available for debt repayments........... 868
Monthly UNsecured debt repayments....... 384
Amount left after debt repayments....... 484

Personal Balance Sheet Summary
Total assets (things you own)........... 271,507
Total HP & Secured debt................. -146,000
Total Unsecured debt.................... -22,100
Net Assets.............................. 103,407

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

Assuming all the debts are pretty much joint based on what you've spent them on (rather than one of you running the debts up without the other's knowledge) then shouldn't it be a joint effort to clear them? In which case, post your household SOA (if you're halving bills with your wife then some of your bills look very expensive). People will be able to advise much more accurately with the full picture of your income and expenditure. You might find you like some of the suggestions and could clear the debt within a few years rather than 29 years !!