Options?

keef82

Hi guys,

I was interested in some advice from the more financially savvy than myself.

I have racked up quite a bit of debt, I’m currently in the red to the tune of £12000. The worst part is that it is spread across credit cards, overdrafts and loans, a proportion of this is on a high interest credit card. There is a number of reasons how I got in this situation that I won’t go into an bore you but basically, I was using credit for essential living expenses that went above my income, I know this is a cardinal sin but I was being stupid and short sighted.

My situation now is that I have gotten a better job with better pay (which is likely to increase again within the year). I am currently maintaining everything with minimum payments but they amount to a whopping £429 per month, after rent bills etc. it doesn’t leave me loads to live on.

Ultimately what I would like to do is snowball and clear the high interest debts and move from there, but there isn’t enough extra money to do anything but pay the minimum’s. My credit rating is poor as I am utilising so much of my existing credit so I can’t transfer on a 0% card. I have looked into a Debt Management Plan through Step Change, what are the risks involved with this? Would it be better to continue maintaining the debt until my income changes and I can start snowballing? Are there any other option for someone in this situation.?

These interest payments are killing me as its so much money that I could be using to reduce my debt but the number just isn’t coming down, as you would expect.

Any advice would be welcome, thanks for your time.

National_Debtline

Hi

A DMP is suitable if you can’t realistically afford the minimum contractual payments on your debts. A major plus is that interest is often frozen so you’ll pay your debts off more quickly. A downside will be that you’ll default on your credit agreements and most likely have defaults on your credit file for 6 years.

If you're concerned about maintaining a good credit history then you'll need to look at snowballing when you can. For now you could post your SOA figures here to ask for advice on anywhere you might be able to tighten your belt and free up more funds for debt payments.

You can use the SOA template here:

www.stoozing.com/calculator/soa.php

James
@natdebtline

keef82

Cheers SOA:

Statement of Affairs and Personal Balance Sheet

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

Monthly Income Details
Monthly income after tax................ 1480
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 1480

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 360
Management charge (leasehold property).. 0
Council tax............................. 53
Electricity............................. 45
Gas..................................... 0
Oil..................................... 0
Water rates............................. 15
Telephone (land line)................... 0
Mobile phone............................ 30
TV Licence.............................. 12
Satellite/Cable TV...................... 0
Internet Services....................... 9
Groceries etc. ......................... 150
Clothing................................ 40
Petrol/diesel........................... 100
Road tax................................ 0
Car Insurance........................... 0
Car maintenance (including MOT)......... 20
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 200
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 10
Haircuts................................ 10
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 1054


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

No Secured nor Hire Purchase Debts

Unsecured Debts
Description....................Debt......Monthly...APR
Vanquis........................2800......186.......0
Pay Pal........................750.......30........0
Santander Credit Card..........3100......90........0
Loan...........................1600......38........0
Overdraft......................1500......30........0
Overdraft......................2000......40........0
Capital One....................200.......10........0
Barclaycard....................150.......5.........0
Total unsecured debts..........12100.....429.......-


Monthly Budget Summary
Total monthly income.................... 1,480
Expenses (including HP & secured debts). 1,054
Available for debt repayments........... 426
Monthly UNsecured debt repayments....... 429
Amount short for making debt repayments. -3

Personal Balance Sheet Summary
Total assets (things you own)........... 500
Total HP & Secured debt................. -0
Total Unsecured debt.................... -12,100
Net Assets.............................. -11,600


Reproduced on Moneysavingexpert with permission, using other browser.[/i]

National_Debtline

There doesn’t seem to be much wiggle room with your outgoings so I can see that things are tight. You could perhaps reduce the clothing cost but that will depend on your personal circumstances e.g. if you need to buy work clothes etc.

Is it correct that you’re not paying car insurance or road tax?

You could realistically add some more outgoings such as more money for housekeeping and emergency funds, and you then clearly wouldn’t be able to afford your contractual debt payments. On that basis it seems that you could try a DMP.

Otherwise you could wait to see how much extra income you receive later in the year and assess then whether snowballing is viable.

James
@natdebtline