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Struggling with debt? Ask a debt adviser a question

edited 24 July 2018 at 2:41PM in Debt-Free Wannabe
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  • StepChange_AllenStepChange_Allen Organisation Representatives - Private Messages may not be monitored
    277 posts
    Fourth Anniversary 100 Posts
    ✭✭
    Hello,

    I was wondering what the options of debt repayment are if you are a mortgage holder? I have contacted by creditors to ask for them to accept the payments I can afford but they are now saying my accounts will go into default. My husband and I thought we could release some of our homes equity to pay off the debt in a lump sum but our bank refused so this is not an option. If I opt for a dmp or Iva would we be forced to sell our home in order to repay the debt?

    Hello

    Thanks for your post.

    I understand it may have been frustrating to have been declined by your mortgage lender, but turning unsecured debt into secured debt can be risky so it may not be a bad thing.

    Neither an IVA or a DMP will force you to sell your home; the only debt solution where home owners would often lose their home is bankruptcy.

    In order to see what your best debt solution is, you can contact us and go through advice over the phone or online, with all details here on our website.

    I hope this is helpful, and that we can help you further.

    Allen
    I work as a debt advisor for StepChange Debt Charity and have specific permission from Martin to post on these boards to try and help those in debt. Read more information on StepChange Debt Charity in the Debt Problems: What to do and where to get help article. If you find you're struggling with debt and you need further help try our online advice facility Debt Remedy.

    Don't be afraid of getting debt advice. We'll help you take one more step towards getting help with your debt.
  • StepChange_AllenStepChange_Allen Organisation Representatives - Private Messages may not be monitored
    277 posts
    Fourth Anniversary 100 Posts
    ✭✭
    stars2017 wrote: »
    Hello, I am new to this. Just wanting a bit of advice really and not sure where to go. We are currently in a DMP with Payplan with a payment of £270 a month to pay debt totalling £21K, we also have a mortgage with C&G, owing £98k, our house has more equity than it did when we started the DMP and has been valued at £160k. We are wondering if there is any way we would be able to remortgage the house and pay a lump sum to pay off the DMP, or even extending the term of the mortgage, as we have 13 years remaining and are 33 and 39, so many working years for us. We have 2 children and both work full time. We had a higher mortgage and less equity when we started the plan and now it looks like we are trapped in not being able to remortgage as we have poor credit reports due to the DMP. Thank you for any help.

    Hello

    Welcome to the forum and thanks for your post.

    I can completely see where you're coming from with this and why this could seem like a really good option to bring the debts down. However, there are things to consider and possible difficulties to the plan.

    First of all, by re-mortgaging or releasing equity in some way to pay off debts, you're basically turning unsecured debt into secured debt, and hence increasing the risk to your house. At the moment the debts on your DMP don't pose any risk to your property, but by extending the mortgage or increasing the payment in order to pay these off it's increasing your mortgage debt. Of course if things go to plan, this may not be a problem at all, but it's hard to be sure.

    Then there's the issue you've eluded to, that it may be hard to get a new mortgage deal as these debt have affected your credit rating. There isn't an easy answer to this to be honest, the reality is how you've described in most cases. Lending is all about risk, so because you've had debt problems, banks will see you as higher risk than before and hence may be less likely to lend (further) money. They may also charge a higher rate of interest. On the plus side, you have more equity, so any lending could be a slightly lower risk due to this.

    I think all you can do with this if you want to try, is to ask the bank whether they'll go for either of these options, and see what they say. I'd hazard an educated guess that your current mortgage company are a little more likely to help than a different lender because you have a payment history with them (at least if you've always paid it).

    I hope this helps a little, good luck with everything.

    Allen
    I work as a debt advisor for StepChange Debt Charity and have specific permission from Martin to post on these boards to try and help those in debt. Read more information on StepChange Debt Charity in the Debt Problems: What to do and where to get help article. If you find you're struggling with debt and you need further help try our online advice facility Debt Remedy.

    Don't be afraid of getting debt advice. We'll help you take one more step towards getting help with your debt.
  • Thank you for your reply. :)
  • Hi, We have a difficult decision ahead of us, our story goes 15 years ago we got into a bad cycle of debt, we went onto having a DMP, this we have paid every month, my credit rating increased and given situations that keep coming up, has helped us to live, add on a bit of over spending we increased this debt further to £25k we pay very little each month towards this DMP due to income. My spouse is about to inherit £25k and we are wanting to pay a few of these debts off, however in the mix is that i am not very well and i have cancer, I feel we should not pay my debt as on death my debt is not liable, however we want to pay something to his, but do not want to open up a hornets nest of others then wanting more money, that monthly we cannot afford, we want to get out of this bad debt cycle but we know that illness and funerals are expensive and we have no savings at all, I have a basic funeral plan, also paid monthly ( no life insurance as was too late to get before cancer) so my moral compass question is what if any debt should we pay, would it be better to pay a little off and to have savings to cover short to long term issues, pay all debt so at some point have a credit rating or lastly leave all debts and just live without worry of gaining more debt?
  • StepChange_KirstyStepChange_Kirsty Organisation Representatives - Private Messages may not be monitored
    180 posts
    Hi Fiona,

    Thanks for your post. I’m sorry to hear about the struggles you and your partner are experiencing.

    I can appreciate this must be a very difficult time for you both and this is a very difficult decision for you to make.

    As a debt advisor I would always recommend paying what you can afford towards the debts and if your husband is due to receive a lump sum inheritance, this could be a good opportunity to deal with the debts so that it is one less thing to think about. Though he would need to work out how much he would need to set aside for household costs and other vital expenses.

    You mentioned you do not feel you should pay your debts with the money and of course your husband is under no obligation to use his inheritance to repay your debts. One thing to bear in mind is to consider if you have an ‘estate’ for example a property. Whilst the liability for your debts will not pass to your husband, unless the debt was taken in joint names, the creditors can apply through probate to have your debts paid through any assets in your name.

    If you’re in a debt management plan (DMP) with us, I would recommend you contact us as there has been a change in your current situation it would be a good idea if we can review your options with a debt advisor.

    Alternatively if you’re not on a DMP with us, this would not prevent you from seeking some independent advice from us based on your individual circumstances. Again, you can find our contact details here.

    I hope this has helped. We look forward to hearing from you soon.

    Kirsty
    fionaxtn wrote: »
    Hi, We have a difficult decision ahead of us, our story goes 15 years ago we got into a bad cycle of debt, we went onto having a DMP, this we have paid every month, my credit rating increased and given situations that keep coming up, has helped us to live, add on a bit of over spending we increased this debt further to £25k we pay very little each month towards this DMP due to income. My spouse is about to inherit £25k and we are wanting to pay a few of these debts off, however in the mix is that i am not very well and i have cancer, I feel we should not pay my debt as on death my debt is not liable, however we want to pay something to his, but do not want to open up a hornets nest of others then wanting more money, that monthly we cannot afford, we want to get out of this bad debt cycle but we know that illness and funerals are expensive and we have no savings at all, I have a basic funeral plan, also paid monthly ( no life insurance as was too late to get before cancer) so my moral compass question is what if any debt should we pay, would it be better to pay a little off and to have savings to cover short to long term issues, pay all debt so at some point have a credit rating or lastly leave all debts and just live without worry of gaining more debt?
    I work as a debt advisor for StepChange Debt Charity and have specific permission from Martin to post on these boards to try and help those in debt. Read more information on StepChange Debt Charity in the Debt Problems: What to do and where to get help article. If you find you're struggling with debt and you need further help try our online advice facility Debt Remedy.

    Don't be afraid of getting debt advice. We'll help you take one more step towards getting help with your debt.
  • Important update! We have recently reviewed and updated our Forum Rules and FAQs. Please take the time to familiarise yourself with the latest version.
  • Hi Kirsty,
    thank you for the reply.
    All of our debt is unsecured as we live in rented accommodation.
    I have not yet called my DMP providers but we have received a letter today from cabot saying they will accept a far lower one- off amount ( there choice at around 30% of total debt) not only is this fantastic timing, but as we are unsure of when the inheritance is due will they keep their offer on the table if we called them and asked to give us a few months as we go threw probate? or is this a ploy for us to call them where we will end up having to pay more?
    I do feel happier that one of us could become debt free, and still leaves a little wiggle room for future.
  • Hi Fiona,

    Thanks for your post and for explaining your situation in more detail.

    It’s very common for debt collection agencies such as Cabot to make settlement offers like this.

    You can let Cabot know you’re interested in their offer, but there’s no reason why you can’t make an offer of your own once you and your husband know how much money you’ll have after the probate has ended.

    There’s more information about making settlement offers on our website and as Kirsty mentioned you can always give us a call if you’d like to go through your options in more detail.

    I hope this helps.

    Linsi
    fionaxtn wrote: »
    Hi Kirsty,
    thank you for the reply.
    All of our debt is unsecured as we live in rented accommodation.
    I have not yet called my DMP providers but we have received a letter today from cabot saying they will accept a far lower one- off amount ( there choice at around 30% of total debt) not only is this fantastic timing, but as we are unsure of when the inheritance is due will they keep their offer on the table if we called them and asked to give us a few months as we go threw probate? or is this a ploy for us to call them where we will end up having to pay more?
    I do feel happier that one of us could become debt free, and still leaves a little wiggle room for future.
  • Hi.
    So this is my first step into asking for help and advice.
    A little about me. I'm 27 and was always good with money. I've been lucky and fallen into a good career that pays well and by 25 became a home owner. Then things went pear shaped.
    The bills and mortgage pushed me to the limit and I coped. I budgeted and managed. Then I met my boyfriend. He was in serious debt trouble and had creditors after him due to pay day loans. Fast forward a few years and it got serious. He had CCJs debt collectors the whole scary lot. So I took out a personal loan to pay off his debts and reduce his payments. He was to pay me. This is a life lesson people. Don't do it. No matter how much you love them it's their battle. If only I could tell the old me this. I wouldn't be in this situation. So we took out the loan including two extra months of payment in case he missed any due to any reason. That in case money went quick. The reason being (something I never considered) he is paid weekly. So I was always owed money. He was always behind. I paid it on the 1st he would pay me 4 times over the month. My against the wire became over spending very quickly. I wasn't used to this. Then problems happened. Then my roof leaked. I had no more reserves for the fixing of this. So I took out a loan to pay for it. It needed to be done urgently. Since then I've been borrowing to cover the gap and it's spiralled. I have frozen my credit card (literally) and tried to stick to tight budgets but the reality is I don't have enough to cover the expenditure. I'm now in a situation where a week after payday my bills are paid and I have nothing left. Nothing for food nights out. Even getting the petrol money to get to work is stressful and hard work. The money isn't going far enough. There's just not enough money to survive on.
    I've done budget after budget. SOA's and it's always negative. My credit rating is getting worse month after month. I'm always in the red by a week after payday but the bills are paid which is a plus I guess.
    So I've been looking into consolidation loans to try and reduce the monthly payments. But at the same time I want something I can overpay on in order to get debt free. The snowball method won't work for me as I literally do t have the money to overpay on anything at the moment.
    Any advice or suggestions would be amazing. I need a way out to get back on track and stop stressing every minute of every day.
  • Hi,


    I currently have 2 credit cards, one with Lloyds and one with Barclaycard. I never miss a payment however the interest on the Barclaycard is tedious and it is as though I am not making any payments and cant see any light at the end of the tunnel!! I owe £2,700 on each card. I pay £60 on the Lloyds and £80 on the Barclaycard.


    I approached my bank for a consolidation loan but they couldn't offer me one at the moment as I had a student account but I want to get this sorted sooner rather than later as I'm 22 and need to start saving for a mortgage.


    Can anyone offer me advice on what to do? I can afford to make the minimum payments but the interest is killing me!


    Danielle there is no way you can even be considering saving for a mortgage if you are unable to make any additional payments to these credit cards.
    You need to really take a fresh look at your finances and outgoing. You have to throw everything you can at the balances to get them paid off as soon as possible.
    Hopefully you could move a portion of them to a 0% card so that you can make a bigger dent in the balance. However if you already have a few credit cards with high proportion balances you may not be eligiable.
    Don't be dishearteneded. I have been there! I know it can seem like a huge mountain but you have to be realistic about what you are wasting money on right now, and having to live a bit more frugally for a while, so that your future isn't impacted by overhanging debt.
    Best of luck!
    Shy Bairns Get Nowt
  • I know the debt experts will get back to you with money advice, but form a personal perspective I see you carrying all the weight of the debt here, and nothing about what your OH is doing to help the situation. He is obviously expecting some kind of miracle to bail out out (as you were to him!)
    Is he aware of how much this is troubling you?
    Have you sat down together to look at what outgoings you have that can be axed? Sky TV, pricey mobile phone contracts, fags, booze?
    I doubt he's as proactive as you to try and sort it so my first advice is to also give him a kick up the !!!! to sort this. Even if it means him getting an additional evening job for a while (cleaning/bar work etc) after all it's his debt which has pushed you over the edge. Plenty of people have to make sacfrifices to get themselves back on an even keel, and so should he!
    Best of luck
    Shy Bairns Get Nowt
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