Help and advice needed - spiralling!

AlP010733

Hello,
So my partner and I are in a bit of a pickle. We moved house recently and the cost of the renovations has crippled us. It cost us so much more than we were expecting and stupidly have used credit cards to help us do so - having already had high loans previously which still paying off. So we now find ourselves - struggling. My partner doesn't seem to think we are but it's giving me sleepless nights as I can't see any way out of it.
I've read through some posts and contacted step change charity who advised us that a Debt Management plan may be a goo option for us... but that scares the life out of me. We're only 27 and 33 and I don't want to mess my credit file up for forever- we have a mortgage already so that's not something we need to get... but what's the cons behind a debt management plan as it only sounded OK (not great as I get it bashes you credit file) to me and something we really should do?
I've read through posts on here and know I need a SOA so I've done that below.
Thanks in advance everyone.

Statement of Affairs & Personal Balance Sheet

Summary

Monthly Budget Summary Amount(£)
Total monthly income 3,282
Monthly expenses (incl. HP & secured loans) 2,050
Available for debt repayments 1,232
UNsecured debt repayments 1,208
Amount left after debt repayments 24
Personal Balance Sheet Summary Amount(£)
Total Assets (things you own) 117,000
Total Secured & HP Debt -82,000
Total Unsecured Debt -45,328
Net Assets -10,328
Household Information

Number of adults in household 2
Number of children in household 1
Number of cars owned 2
Income, Expense, Debt & Asset Details

Income Amount(£)
Monthly income after tax 1100
Partners monthly income 2100
Benefits 82
Other income 0
Total monthly income 3282
Expenses Amount(£)
Mortgage 342
Secured/HP loan payments 158
Rent 0
Management charge (leasehold property) 0
Council tax 126
Electricity 40
Gas 40
Oil 0
Water Rates 46
Telephone (land line) 0
Mobile phone 70
TV Licence 13
Satellite/Cable TV 63
Internet services 0
Groceries etc. 320
Clothing 80
Petrol/diesel 160
Road tax 15
Car Insurance 102
Car maintenance (including MOT) 20
Car Parking 0
Other travel 0
Childcare/nursery 0
Other child related expenses 180
Medical (prescriptions, dentists, opticians etc.) 0
Pet Insurance/Vet bills 5
Buildings Insurance 20
Contents Insurance 0
Life Assurance 25
Other Insurance 0
Presents (birthday, christmas etc.) 60
Haircuts 35
Entertainment 70
Holiday 20
Emergency Fund 40
Total monthly expenses 2050
Secured & HP Debt Description Debt(£) Monthly(£) APR(%)
Mortgage 74000 (342) 3
Hire Purchase (HP) Debt 8000 (158) 9
Secured & HP Debt totals 82000 - -
Unsecured Debt Description Debt(£) Monthly(£) APR(%)
Barclaycard 11000 250 0
Barclaycard 7000 157 0
Santander 6000 352 0
Virgin 4328 65 0
MBNA 5000 75 0
Zopa 12000 309 0
Unsecured Debt totals 45328 1208 -
Asset Description Value (£)
Cash 0
House Value (Gross) 115000
Shares and bonds 0
Car(s) 2000
Other assets (e.g. endowments, jewellery etc) 0
Total Assets 117000

DrWatson1

If you can keep those debts at 0% and tighten your belt, you can comfortably get them paid of in 5 years - you just need to make sure your other half takes the situation seriously.

Expenses seem okayish, but £102pm is way too much on car insurance, and £420 a year on haircuts.... if you are really taking your debts seriously, those things have to go.

warby68

You have decent income and nothing unusual in your bills (some might be a bit high but saving a few quid here & there would be scratching the surface for you)

You can probably sort your debt over time but the current level of repayments looks too tight especially if some of these are minima.

A fundamental question is whether your renovations have increased the value of your house - if they have then I would make an exception and say that a remortgage/consolidation could be justified to allow you to deal with the property related stuff over a longer term, assuming your credit rating will allow this.

However you said you already had large loans pre-mortgage. So I think you need to consider and perhaps disclose what the reasons were for that spending and whether you have broken the habits or solved the issues that caused that.

If you are general overspenders/want it now people (apologies if hard to hear) and if the renovations were really just decor & furniture, then you should probably look at some kind of plan as it will sort your debts and also 'force' you into some kind of financial discipline for a few years. At your ages, there is time to recover and rebuild

missparsnips

warby68 wrote: »

You have decent income and nothing unusual in your bills (some might be a bit high but saving a few quid here & there would be scratching the surface for you)

You can probably sort your debt over time but the current level of repayments looks too tight especially if some of these are minima.

A fundamental question is whether your renovations have increased the value of your house - if they have then I would make an exception and say that a remortgage/consolidation could be justified to allow you to deal with the property related stuff over a longer term, assuming your credit rating will allow this.

However you said you already had large loans pre-mortgage. So I think you need to consider and perhaps disclose what the reasons were for that spending and whether you have broken the habits or solved the issues that caused that.

If you are general overspenders/want it now people (apologies if hard to hear) and if the renovations were really just decor & furniture, then you should probably look at some kind of plan as it will sort your debts and also 'force' you into some kind of financial discipline for a few years. At your ages, there is time to recover and rebuild

Thank you for your reply! Please ignore my change of username. My accounts are all messed up and for some reason it isn't recognising my original post username anymore. This is an old account.

The repayments on the credit cards, yes they are the minimum payments. However they are all on 0% balance transfer deals. Still not great to be paying the minimum I know but we don't have much option.

One of the loans was my partners from a previous relationship, which has 12 months left owing and the other was from from our old house which has 4 years remaining (kitchen renovation and knocked through diner) - which sounds madness but the house we recently bought - the new house but it was a kind of a spur of the moment purchase when my Nan passed away we bought her house at a massive reduced rate. House now the renovations are complete is worth around 120k and we have a mortgage of 73k. We couldn't really afford to move but we would have never afforded a house we have now had we not have made the leap... it's more than our forever home and we don't plan on ever moving again (unless we win a lotto win maybe!) and are mortgaged for 23 years.

We were thinking of remortgaging and borrowing 16k to pay off the loans so that it left us with more surplus money to tackle the credit cards but was worried that we may not even get a remortgage at the moment. Our mortgage deal is up in June 2017.

missparsnips

DrWatson1 wrote: »

If you can keep those debts at 0% and tighten your belt, you can comfortably get them paid of in 5 years - you just need to make sure your other half takes the situation seriously.

Expenses seem okayish, but £102pm is way too much on car insurance, and £420 a year on haircuts.... if you are really taking your debts seriously, those things have to go.

£102 a month is for the 2 cars - I was unable to get any cheaper deals. I searched high and low on the market

ratrace

You both need to get serious about this you have £54,000 of debt (including the £8,000 hp)

You have £24 left over after all the expenses (see soa) and you are just keeping your head above water, what will happen if you fall pregnant or there is a job loss or health issues how are you going to pay everthing we have to think about these things, get your other half to stop burying his head in the sand and to get on board

you have to tackle this together, you need to sit down and make a budget ans stick to it religiously, once your out at the other end you will greatfull you did it and you will have all that extra money which you can then chuck at the mortgage to get it paid off

Im really sorry if i have come across harsh but nobody is going to come do it for you, you guys have to take charge of this, you can consolidate etc... but all you are doing is pushing the debt about, there is only one way it goes away and thats by paying it off

sorry if i have come across harsh only trying to help

autumn2012_2

Can you manage with 1 car? Also Id get rid of sky etc.. Im struggling with 27k so Iv cut right back and I honestly have not missed sky! Dont panic! We are all here to help x

EssexHebridean

Well done for acknowledging that you feel that you're in over your heads. There's not a lot around here that's not fixable! I'll pop comments on your SOA in red.

AlP010733 wrote: »

Statement of Affairs & Personal Balance Sheet

Summary

Monthly Budget Summary Amount(£)
Total monthly income 3,282
Monthly expenses (incl. HP & secured loans) 2,050
Available for debt repayments 1,232
UNsecured debt repayments 1,208
Amount left after debt repayments 24
Personal Balance Sheet Summary Amount(£)
Total Assets (things you own) 117,000
Total Secured & HP Debt -82,000
Total Unsecured Debt -45,328
Net Assets -10,328
Household Information

Number of adults in household 2
Number of children in household 1
Number of cars owned 2
Income, Expense, Debt & Asset Details

Income Amount(£)
Monthly income after tax 1100
Partners monthly income 2100
Benefits 82
Other income 0
Total monthly income 3282
Expenses Amount(£)
Mortgage 342
Secured/HP loan payments 158
Rent 0
Management charge (leasehold property) 0
Council tax 126 Is this spread over 12 months? That can make it easier to budget than the 10 month standard.
Electricity 40
Gas 40
Oil 0
Water Rates 46 Is this metered? It *might* be worth checking how the costs would compare if not
Telephone (land line) 0
Mobile phone 70 Hoe soon can you bring this down - are you currently tied to contracts? There are some cracking SIM only deals out there if not.
TV Licence 13 12.12 - picky, I know, but that odd 88p might make a difference, down the line.
Satellite/Cable TV 63 Does this include landline and internet? You can probably haggle it down a bit if so, and you definitely can, if not!
Internet services 0
Groceries etc. 320 You could probably knock £70 - 100 a month off this
Clothing 80 For the time being this needs to be essentials only to reduce this
Petrol/diesel 160
Road tax 15
Car Insurance 102 Keep an eye out and make sure you do a thorough shop-around when it's next due. Check the details in the comparison sites are correct as this does seem high.
Car maintenance (including MOT) 20 Are you ensuring that you put this away somewhere safe so it's there when needed? It doesn't seem like a lot to pay for MoT and servicing on 2 cars.
Car Parking 0
Other travel 0
Childcare/nursery 0
Other child related expenses 180 Is this anything that can be trimmed/go altogether?
Medical (prescriptions, dentists, opticians etc.) 0
Pet Insurance/Vet bills 5
Buildings Insurance 20 Does this include contents? Have you checked its the best value you can get for the cover you need?
Contents Insurance 0
Life Assurance 25
Other Insurance 0
Presents (birthday, christmas etc.) 60 Thinking ahead might trim this a good bit. The after christmas sales might be your friend here.
Haircuts 35 Every month? Is one of you Chewbaccas cousin? Nope - that can come down. Is the small person of an age where home haircuts are still acceptable?
Entertainment 70
Holiday 20 Is this actually being stashed away? Remember where you're saying things are set aside monthly, they do need to be, otherwise your budget is telling you porkies.
Emergency Fund 40 As above about money being stashed aside.
Total monthly expenses 2050
Secured & HP Debt Description Debt(£) Monthly(£) APR(%)
Mortgage 74000 (342) 3
Hire Purchase (HP) Debt 8000 (158) 9 How much longer on this?
Secured & HP Debt totals 82000 - -
Unsecured Debt Description Debt(£) Monthly(£) APR(%)
Barclaycard 11000 250 0
Barclaycard 7000 157 0
Santander 6000 352 0
Virgin 4328 65 0
MBNA 5000 75 0
Zopa 12000 309 0
Unsecured Debt totals 45328 1208 -
Asset Description Value (£)
Cash 0 If you genuinely do set aside money for things each month, there should be a figure in here...
House Value (Gross) 115000
Shares and bonds 0
Car(s) 2000
Other assets (e.g. endowments, jewellery etc) 0
Total Assets 117000

Some savings there. As you currently have a surplus, and can increase that surplus, I'm going to dispute that adding to your mortgage is a good way forwards for you. As someone else said, you can potentially with careful management and shuffling between 0% deals, get that debt sorted in 5 years or thereabouts - I see little point in putting it into a situation where it is costing you in interest AND for 20+ years? The ONLY potential exception to that would be if you added it to a mortgage that was flexible with overpayments, and threw every spare penny at the mortgage - but even then it may still cost you extra.

My suggestion would be set yourselves a challenge to tighten your belts as much as you can for 6 months and see at the end of that time what sort of an impact you've been able to make. That may work as an incentive to be able to keep on really hammering it from that point - it's amazing how addictive it can get! That also ties in well with when your current mortgage deal ends, so would be a good time to revisit your position.

warby68

Just to stress I would only recommend remortgage if it had been spent on genuine added value, as part of a long term dream house type plan, and unfortunately that isn't the case here with little increase in house value relative to the debt they are carrying.

I think the fact they have a material home improvement loan relating to a previous property still outstanding perhaps does show that their spending is not being recouped in increased equity.

I certainly wouldn't recommend a remortgage that only gets rid of a small bit of the debt as the OP is thinking - the increased LTV/interest rate and fees would probably be better thrown straight at the debt.

First things first though, the OP needs to get the OH on board - has he seen the SoA? Does he know how much of your income is taken up servicing short term debt with the risk of interest rates and your circumstances changing?

Is there potential to increase either of your incomes while you hammer some debt?

Other people are better at the fine toothcomb stuff on expenses than me but I see the biggest change needed here as one of attitude.

If you can bring OH to the table, I think you could see what you can achieve by yourselves for 6m and then review it.

In terms of a sense check, even if you manage to keep to 0% interest £40k (a bit of an assumption regarding the current minimum payment debt) over 5y as some are suggesting would mean freeing up something like £750 pm - will this ever be realistic for you OP? Even over 10y its £375 and the chances of some hurdles along the way are very high then. I wouldn't dismiss the DMP route if you need extra discipline or to obtain some protection from interest rate changes.

EssexHebridean

Thinking of ways to boost income within the time you have available is a good one. Surveys can be done while you sit in front of the TV, for example. Clicking through from TopCashBack or Quidco when you shop on line. Selling stuff that you don't use, or need works for some people too.

I suspect the thing of most value when it comes to getting your OH on side is how it's affecting you and your wellbeing - if he sees that reining the situation back will make a huge difference to how you're feeling about things it would be surprising if he's not happy to join in.

January2015

Don't add unsecured debts to your mortgage or a secured loan. Been there, done that, and built up debts again. If you can manage/cut back to clear the debts whilst they are unsecured this would be a much better option.