IVA and debt consolidation question.

dgraffham

In a bit of financial trouble. Managing to pay all bills and debts each month, with a really tiny amount spare for other things. Already spoken with an IVA company, they have said I qualify but it's not something I want to do, I'm happier to pay back what I owe in the easiest way I can.

After doing a lot of calculations, I could carry on paying all my debts as I currently do, until they are paid off. Or if I managed to get a consolidation loan, I could save £10,000 overall in the long term.

The debts I need to pay off are my existing bank loan (closing early will save £5000 on interest) Plus 4 credit cards.

The problem I have now is, how do I get my bank to agree to give me a consolidation loan with a low enough APR. The saving of £10,000 mentioned above is based on a loan at the advertised 6.6% APR. My current bank loan is somewhere around 18% APR I think, which I was granted at a time when I had a good credit score. If they offer me that rate again now it wouldn't be worthwhile. I would be able to pay all debt off in 5 years, but the monthly repayment will be far too much.

When applying for a loan with my bank is it worth mentioning that I'm currently in financial difficulty and considering taking out an IVA, could that help me? Given that my biggest current debt is my existing bank loan and my bank would be likely to lose a lot of it if I went through with the IVA. Can this be used as a form of bargaining tool with my bank, if I show willing to repay my debts instead of writing them off?

Does anyone have experience of a similar situation?

Karonher

I would be surprised if any bank who knew you were in financial difficulty would give you more money.

Most people on here would advise against consolidation anyway and if you are hoping to save £10,000 it sounds as if you will be asking for a large
loan.

sourcrates

Very bad idea.

Paying off debt with more debt, you won't save money.

Only a small % of people will get the advertised rate, for everyone else it will be based on there credit scoring assessment of you, and it's doubtful you will be approved anyway.

Why not post a statement of affairs ?

There may be other options open to you, consolidation only works in certain limited circumstances, and is generally considered a very bad idea.

dgraffham

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 0
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 1637
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 562.67
Total monthly income.................... 2199.67

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 750
Management charge (leasehold property).. 0
Council tax............................. 114.72
Electricity............................. 81
Gas..................................... 64
Oil..................................... 0
Water rates............................. 60.66
Telephone (land line)................... 18.99
Mobile phone............................ 29.99
TV Licence.............................. 12.12
Satellite/Cable TV...................... 0
Internet Services....................... 0
Groceries etc. ......................... 150
Clothing................................ 0
Petrol/diesel........................... 60
Road tax................................ 0
Car Insurance........................... 35.47
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 18
Pet insurance/vet bills................. 6
Buildings insurance..................... 0
Contents insurance...................... 11.86
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 0
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 1412.81


Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 200
Other assets............................ 0
Total Assets............................ 200

No Secured nor Hire Purchase Debts

Unsecured Debts
Description....................Debt......Monthly...APR
HSBC Loan......................20490.....426.......16
Barclaycard....................6041......200......22.2
Tesco Credit Card..............3346......92........22.4
Lloyds Credit Card.............469.......19........25.7
Halifax Credit Card............3134......32........21.7
Bank Overdraft.................2500......0........ -
Total unsecured debts..........35980.....769.......-


Monthly Budget Summary
Total monthly income.................... 2,199.67
Expenses (including HP & secured debts). 1,412.81

Available for debt repayments........... 786.86
Monthly UNsecured debt repayments....... 769
Amount left after debt repayments....... 17.86

Personal Balance Sheet Summary
Total assets (things you own)........... 200
Total HP & Secured debt................. -0
Total Unsecured debt.................... -35,980
Net Assets.............................. -35,780

dgraffham

Thanks for the reply, below is what my calculations came to, which I based my decision for a consolidation on.

Balance on credit cards: 12991.80
If I repay them all, paying the same monthly payment I do now. Once all cards are cleared the interest paid will total circa £5344.72.

£18336.52 to pay on credit cards

£20490.24 to pay on existing bank loan

£38826.76 In Total to pay to clear debt.

Consolidation loan would need £12991.8 + £15798.88 (Bank loan settlement figure) Totaling £28790.68.

The most my bank will give me is £25000. I would be able to pay off the extra £3790.68 by December, meaning I could get a loan for £25000 at that point to consolidate all the debt I have.

With a loan offering 6.6%APR over 4 years, total repaid would be £28463.25, at £591 per month, where I currently pay £769 per month.

enthusiasticsaver

I am sorry but you won't get 6.6% on an unsecured basis. That is the lowest base rate and is usually reserved for people who have very few financial commitments. On your current borrowing you are already over committed so the chances of getting further borrowing are very very low. I am surprised your previous loan was as high as 18% if your credit score was good then. That is a very tight budget. Does your partner not work and is all the debt in your name?

dgraffham

Thanks, so my partner does work, I pay all of the household bills and their half of the bills is sent to me each month which is the "other income" figure.

My partner manages his own debts (which are a bit less than mine) and I manage my own. My partner does earn more than me, but does have 3 children that he pays maintenance for and has with him very often.

Yes it is a tight budget, this is actually the worst its been for me personally, I've done all the usual cut backs on everything non-essential, and as the interest free-periods all ran out on my credit cards, I'm now living on a very tight budget looking for a way to soften the blow a bit.

I think my only option is to live on this same tight budget every month for the next 5 years to clear everything. Or take out the IVA.

January2015

Whatever you decide to do - do not take out further loans to sort the problem. Consolidation rarely works. It usually masks the problems for a very short time - and then additional borrowing creeps back in and your debt total rises - the cycle repeats.

That's how we got into over £100k unsecured debt (at it's highest, prior to entering a DMP). Horrific numbers - but we thought we could consolidate - did that a few times and ended up with nowhere to turn. We opted for a DMP because it better suited my work commitments (cannot have a formal debt solution in place whilst holding the post I do).

Facing up to the debt and seeking a solution that allowed us to live a quality life whilst knowing the debts are being repaid and in a reasonable timescale is the best financial decision we ever made.

dgraffham

I really don't know what I'm going to decide to do. I thought i'd looked at all my options and consolidation seemed the best solution. But now thinking about it, there's no way I'll get one, and maybe its not the best solution. But I also don't want to go down the IVA route.

I'm desperate to get a mortgage, originally wanted to achieve this before I was 30, but I've got a long way to go now.

CocteauTwin

I would think long and hard about an IVA and only consider it as the 'nuclear option'. It sounds ideal: 5 years and debt free! However, if you have seen the Film Misery and especially the 'hobbling of the victim's legs' then this is a accurate comparison. Depending on which company you use the experience can differ vastly. Do your own research.
As an IVA is legally binding, you are ' shackle to a corpse' for 5-6 years. The IP Worker changes regularly and the annual review feels like purgatory. If you can make arrangements directly with your bank this might be a better option.

IVA Ended this week;-)

dgraffham

That is why I don't really want to go down the IVA route, that and I feel like I should take responsibility for all of my debts.

What does anyone think is the best option from here? Write to my lenders and try to ask for a lower APR and go from there?