Working hard but still in debt

StrugglingWithDebt87

Hi,
I'm almost 30 and drowning in debt. At the age of 19 I took on car finance (at the advice of my father) which absorbed half of my £650 full time wages every month.
Since then I've been going through an endless struggle to keep up with debts which have now spiralled out of control.
I have an excellent job and am about to be promoted for the second time in 12 months. I earn a good salary but I'm still not able to keep up to date with payments.
Due to my occupation I'm unable to be declared bankrupt or go for an IVA and I just don't know what to do.
My credit rating is through the floor. The annoying thing is, if I were able to get a low interest loan, I could pay off the debt and easily keep up the payments, now that my salary is at such a good level.
My current debt total is around £25,000 across credit cards, overdrafts and payday loans.
The only good thing that being in debt has done for me is make me work hard enough to exceed mine and my families expectations (having come from a modest background and finishing education after college studies).
All I want to do is get debt free so I can buy my first home. Any advice would be so gratefully received.
Thank you

bearcat16

Post an SOA, and you'll find that the helpful folk here will give extensive advice about what would be best.

StrugglingWithDebt87

Thank you. What's "SOA"?

-taff

Staement of affairs...bascially a big list of items agaisnt which you write down what you spend each month, including any debts and any assets.

Link to it http://www.stoozing.com/calculator/soa.php

Sam29

Hi strugglingwithdebt87. Well done on the good job and for working hard. It is frustrating to see that effort go into paying debt which is a long and tedious process. The last thing you want to do is take on a consolidation loan. This doesnt pay off the debt it merely puts it all in one place and likely will make things worse. You say that your credit rating is through the floor so if you were to take on such a loan its likely any lender would charge you high interest because of your credit rating. This would likely add to debts rather than improve them. Unfortunately there are no quick fixes and consolidating rarely works.

One great way to reduce debt is to shift it to zero percent cards. You might need to improve your credit rating for this so first tou need to find out the APR on each of your debts and focus on chucking every spare penny at the highest and snowball your payments once each one is paid off. Its a long slog but the more you pay the easier it gets so the more you have to pay. Its surprising how quick the credit companies want to offer you things once you start paying off the cards (anyone would think they wanted you to be in debt) The interest rate is the thing that traps you so focus on this rather than the final debt total.

Post an SOA and then we can help to identify areas where you can free up some cash for debt busting. Good luck!

ronny147

Sam29 wrote: »

Hi strugglingwithdebt87. Well done on the good job and for working hard. It is frustrating to see that effort go into paying debt which is a long and tedious process. The last thing you want to do is take on a consolidation loan. This doesnt pay off the debt it merely puts it all in one place and likely will make things worse. You say that your credit rating is through the floor so if you were to take on such a loan its likely any lender would charge you high interest because of your credit rating. This would likely add to debts rather than improve them. Unfortunately there are no quick fixes and consolidating rarely works.

One great way to reduce debt is to shift it to zero percent cards. You might need to improve your credit rating for this so first tou need to find out the APR on each of your debts and focus on chucking every spare penny at the highest and snowball your payments once each one is paid off. Its a long slog but the more you pay the easier it gets so the more you have to pay. Its surprising how quick the credit companies want to offer you things once you start paying off the cards (anyone would think they wanted you to be in debt) The interest rate is the thing that traps you so focus on this rather than the final debt total.

Post an SOA and then we can help to identify areas where you can free up some cash for debt busting. Good luck!

We took on a conslidation loan of 25k in May 2014 - now there is 3k left - paid off in May of this year. Monthly payments of 871. The debt over 7 credit cards and interest paid on each cc meant that had we paid down the credit cards at 871 we would be no where near paying off this loan now.

So to add another point of view consolidation loans can sometimes work. But *I get the point that not in all circumstances

fatbelly

You could try a complaint about the payday loans

http://forums.moneysavingexpert.com/showpost.php?p=71872763&postcount=3

it's probably going to be a debt management plan for the rest as you've effectively ruled out IVA, bankruptcy and DRO. You will need a 'clean' bank account for your income that isn't connected to any of your debts.

sourcrates

Hi,

No don't consolidate your debts, debt management is most likely the way forward for you.

Your other option is to stop paying your debts, save up a large pot of money, and settle each one as they are sold on to debt purchasers for as little as possible.

Consolidation does not address the reasons you got into debt in the first place, it's a quick fix that does not address the real issue.

EssexHebridean

First step is to make sure that your budget is rock solid, and ensure that you stick to it. That's where the SOA comes in. Until you've done this bit there's no sense in talking about options for getting rid of the debt - it may be achievable far quicker than you think with a few tweaks, or it may be more of a long-haul. Until you've put the building blocks of a budget in place though, consolidation will be utterly pointless in any case (and it's unlikely to be your best option even once you HAVE got the budget all sorted) and in fact may end up with 3 years down the line you being in a far worse situation.

enthusiasticsaver

I would not go for consolidation. £25k is a lot but by no means the worst. If you post an soa as EH suggests that may help.

The key to getting out of debt is firstly spending diary to see where your money is going and look for ways to reduce outgoings.

Increase income - overtime, selling on eBay, car boots, take in lodger

Change money mindset - instead of thinking I work hard therefore I need a holiday, new car or whatever, remind yourself spending on credit is not your money and you will pay dearly for the privilege of using it. Think do I need this or do I want this and learn to recognise the difference.

Discover your savings habit - emergency fund so you not tempted to use credit card, savings pots for house and car maintenance, holidays, gifts, insurances etc

Draw out cash weekly for everyday spending, budget for everything and cut up credit cards and close accounts as they paid off

Gunther_Golf

ronny147 wrote: »

We took on a conslidation loan of 25k in May 2014 - now there is 3k left - paid off in May of this year. Monthly payments of 871. The debt over 7 credit cards and interest paid on each cc meant that had we paid down the credit cards at 871 we would be no where near paying off this loan now.

So to add another point of view consolidation loans can sometimes work. But *I get the point that not in all circumstances

All too often consolidation is written off as being a poor option for those struggling to manage multiple repayments where they cannot see the light at the end of the tunnel.

Consolidation was and has been the perfect option for me. Multiple credit card, catalogues and a loan were costing me around £750 every month and whilst i was not on the breadline it was soul destroying to see my level of debt barely reduce each month due to the levels of interest. A Vanquis card with god knows what rate of interest was seeing a £3000 balance reduce by only around £30 a month - The rest servicing the interest only.

I got myself into the level of debt i was in and take full responsibility for it - Not blaming anybody else. A consolidation loan to repay in full every debt i had was brilliant for me and has cut my monthly repayments by over £400 a month. This "extra" £400 a month now gets put into a "safety net" pot as i have also since became a homeowner and all the responsibilities that come with it. It's also my intention to shave at least 2 years off the 7 year single loan repayment which i was fortunate enough to be awared at a competative rate of interest. I'm well on track for that to date.

It is however not as simple as getting the loan and clearing the crippling balances. You MUST be completely disciplined with your income and outgoings going forward. The fear of getting back to the crippling balances that i had before keeps me on track and using 2 credit cards only - 1 for fuel and 1 for groceries which are paid in full every month has worked well for me. I could use my debit card but i am keen to keep my good track record to date of managing credit ticking over.

The consolidation loan took a lot of pressure off my shoulders and has been replaced with a much more healthy burden of responsibility.

I'm sure there are countless cases of folk consolidating debts then racking them back up. If you change your mindset and stay true to yourself then it can be a solution.