Best way to begin chipping away my debt? (soon to be unemployed!)

Hi there,

I've spent the last few days stressing about my built up negative credit and I am in a confuzzle about how or where to start paying it.

In a bid to remain super anonymous, I won't reveal too much about my life. I have/had a full time job whilst in placement year from university, but 6 months ago fell unwell so now work any hours I can - which leaves me with very little money usually (getting paid around £400 p/m currently, a drop from £1000 I was getting).

HOWEVER, before all of this when the grass was green and the skies were blue... this is how my 'debt' issues began!

Last July, I purchased my first car after I passed my test (need it to drive too and from work). I got a credit card, £6000 limit (seemed crazy I should get so much when I only needed £3000. Swore I wouldn't use the entire balance).
Anyway, insurance set me back £2000 and the car was £400. Not long after, the car fell to pieces and left me needing a new one - got one for £800 and thankfully it has done me proud so far. The new car then needed a full set of brakes costing £110 and a new battery £60, so small things. This left me at my almost 3k 'limit'.

In line with this, I had already maxed my £1500 student overdraft (whilst at uni) which I had plans to have paid back from placement earnings by the time I returned to uni.

Then I fell ill and have needed the rest of the credit to live; paying for petrol, food, mobile phone contract, car tax - general life stuff.

I'm now at £5500 on the credit card and still maxed out on the overdraft. The minimum payment is around £130 a month on the credit card. And car insurance is due again very soon, which I will need at least 3 months before I won't need the car for a little bit.

My job is due to end in the next few months, leaving me then with no income until September when student finance will step back in. The majority of this will go straight into halls though and leave me with about £40 a week for each term (@10 weeks long each).

The panic is actually more to do with the student overdraft (with Santander). I'm aware that at the end of my studies they can withdraw it. I won't be able to afford ANY large lump sum payments if they decide to this, no do I want to be incurring any extra charges.

So whilst I need to be making the minimum payments on the credit card, I need to somehow pay back the overdraft gradually.

I don't see a way forward in which I can achieve this. There will be no way I can afford £350 with minimum payments and phone contract whilst back uni. Of course my first task when returning to uni will be to find a part time job if possible!

Anyone have any suggestions on the best way to work around this? Could I start paying off the overdraft slowly first, pay the minimum on the credit card but then use that credit card payment to buy my food? Therefore nothing on the credit card is being paid back for a while?

I'm disappointed things have gotten this far. I didn't intend on falling ill (tough lesson learned on saving for a 'rainy day' that's for sure). But I've seen my parents struggle and go through an IVA - lots of tears, arguments and generally a hard upbringing in a debt-filled home. I don't want to suffer the struggles my parents had and they'd be gutted if I did too. We've already had many conversations with regards to them not wanting me and my siblings to follow the same path. Although we have an understanding that there wasn't much I could do this year given the circumstances, they couldn't afford to help me as such (although they let me live at home rent free) so I had no other income options.

I want to nip this in the bud now, but I think this one year is unfortunately going to take several years to reverse me back into the good credit.

I'm sorry for such a long post, it's part rant and release of stress but also a quest for some help/advice.

I've probably left some vital information out that would have helped an answer, so please let me know.

Any advice or information would be appreciated,
Thanks

Comments

  • sourcrates
    sourcrates Forumite, Ambassador Posts: 27,711
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    edited 22 April 2017 at 10:25PM
    If no income, and not a home owner, is a debt relief order a possibility ?

    May be worth looking into.
    I’m a Forum Ambassador and I support the Forum Team on the Debt free wannabe, Credit file and ratings, and Bankruptcy and living with it boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing [email protected]. All views are my own and not the official line of MoneySavingExpert.For free non-judgemental debt advice, contact either Stepchange, National Debtline, or CitizensAdviceBureaux.Link to SOA Calculator- https://www.stoozing.com/soa.php The "provit letter" is here-https://forums.moneysavingexpert.com/discussion/2607247/letter-when-you-know-nothing-about-about-the-debt-aka-prove-it-letter
  • phillw
    phillw Forumite Posts: 5,545
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    23NotFree wrote: »
    The panic is actually more to do with the student overdraft (with Santander). I'm aware that at the end of my studies they can withdraw it. I won't be able to afford ANY large lump sum payments if they decide to this, no do I want to be incurring any extra charges.

    How long do you have left on your studies? Also doing an MA/PHD should let you keep the overdraft.
    My advice would be to not panic as stress won't help with your health, focus on that and your ability to work will increase.
  • fatbelly
    fatbelly Forumite Posts: 19,234
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    sourcrates wrote: »
    If no income, and not a home owner, is a debt relief order a possibility ?

    May be worth looking into.

    Basic Criteria for a debt relief order :

    •Must not be a homeowner,

    • Debts less than £20,000,

    • Can have a car worth up to £1000,

    • No other assets of more than £1000,

    • Must have £50 or less left at month end, after all essential payments have been made (not inc debt repayments),

    • Cannot have had a DRO in last 6 years.
  • Karonher
    Karonher Forumite Posts: 900
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    You could sell the car. That would give you money to go towards the overdraft and no insurance to pay.

    Speak to the phone company about a reduced phone contract and this could go towards the credit card.

    With regards to OP they say they have £40 a week left so above the level for a DRO.
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  • enthusiasticsaver
    enthusiasticsaver Forumite, Ambassador Posts: 14,733
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    I don't think you can afford to run a car so you should sell that to start with. You also should not be using a credit card to pay food. Write out a proper budget. Get rid of the car expenditure. Move to sim only contract on mobile phone asap and reduce costs as much as possible.

    I’m a Forum Ambassador and I support the Forum Team on the Debt free Wannabe, Budgeting and Banking and Savings and Investment boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing [email protected]. All views are my own and not the official line of MoneySavingExpert.
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  • nkkingston
    nkkingston Forumite Posts: 488
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    You need to start fresh on some level here. If you're putting priorities like food on credit, you've probably got a negative budget, and you need to get that fixed before you can look for a debt solution.

    Separate out your priority needs (rent, utilities, food) from your non priority (credit cards). Work out how much income you need to meet your priorities. Do you have that income? If not, explore whether you're eligible for any benefits - it's a pain if you're a student, because none of the online checkers will work for you, but it's worth doing - your local CAB should have someone who can help with this.

    If you do have enough income to cover your priorities, look at what you have left over to contribute to debt repayments. If this is less than the minimum payments, then you need to look at debt solutions like a DRO or DMP. Debt charities (like CAB, or Stepchange) can help you explore your options.

    If you have more disposable income than your minimum payments, then you need to create a budget and stick to it and start pushing the debt back down. Post an SOA here and we'll help you find ways to make small savings that add up.
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  • National_Debtline
    National_Debtline Organisation Representatives - Private Messages may not be monitored Posts: 7,998
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    Hi

    I agree that posting your SOA figures is a good idea.

    There’s a template here:

    http://stoozing.com/calculator/soa.php

    James
    @natdebtline
    We work as money advisers for National Debtline and have specific permission from MSE to post to try to help those in debt. Read more information on National Debtline in MSE's Debt Problems: What to do and where to get help guide. If you find you're struggling with debt and need further help try our online advice tool My Money Steps
  • fatbelly
    fatbelly Forumite Posts: 19,234
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    Karonher wrote: »

    With regards to OP they say they have £40 a week left so above the level for a DRO.

    I took that to mean £40 left after accommodation costs, so £40 to spend on:

    food
    phone
    clothes
    travel

    i.e. zero
  • 23NotFree
    23NotFree Forumite Posts: 3 Newbie
    Hi,

    Firstly, thank you to everyone who took the time to reply!

    Secondly, in response to points made:

    - I wouldn't like to look at any debt relief orders and such (anything that will have a long last impact on my credit score). I've only had credit for 5 months now, always made payments on time (I have no issue paying the credit card bill or direct debits, I just run short each month currently which means I do then go back and spend on the credit card!). But I currently seem to have a 'so-so' credit score. Assuming this is more because I have almost £6000 borrowed and haven't had long enough for the score to build up yet?
    Anyway, more than that, I'd like to prove that as I borrowed the money, I can/will pay it back. Thank you for the suggestion though :).

    - I have 1 year left at university from October. I would hope to have the overdraft knocked on the head by then. But I've since read I may be able to apply for a graduate account after university which continues the 0% overdraft. Thanks for being reassuring, stress definitely hasn't helped in recent months!


    - I will get in contact with my phone company and see if they are able to help. Annoyingly I renewed in December when everything was A/OK and no debt, so still have 19 months to go almost.

    - I need my car currently to be able to get myself to work. Once I'm at uni, not so much so this is an option from October.

    - My costs are as follows:
    - Vodafone x 2 @ £37.00
    - Car Tax @ £12.68
    - Cineworld @ £17.40
    - Gym @ £37.00
    - Barclaycard @ (between) £120-£140 minimally per month
    - Petrol @ £80-£100 per month

    My income varies depending on my health, so cannot give an exact amount, but it is usually around £400 as of current. However hoping to return full time asap for a few months. My parents do buy the main bulk of food but I try contribute.

    Cineworld & Gym (although I make the most of currently) cannot be cancelled as such; they expect me to pay out the contract in order for me to end them. So they'll both be gone come August.


    I think I've address most/all points. And thanks everyone once again.

    I feel more annoyed at myself that I've been very against credit (cards/overdrafts) for so long and in 5 months have created myself an issue that will take years to rectify. Such as life though, hopefully hard work will help pay it off!!
  • EssexHebridean
    EssexHebridean Forumite Posts: 19,086
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    edited 27 April 2017 at 11:29AM
    You've missed car insurance off that list. And servicing/MoT test, and routine depreciation... Looking at your fuel spend and assume you'd put standard budget tyres on the car you probably need to budget for a full new set every year - 18 months. A full service annually will be £150-ish. Work out all your "lump sum" costs and then divide by 12 to give a monthly cost - that is the amount you need to set aside each month to make sure you can keep covering your car expenses. Just for your insurance alone you need to set aside somewhere about £150 a month though - I take it you have done all the price comparisons and made sure the insurance was the cheapest you could get for your needs?

    NEVER pay car tax on a credit card - they charge a premium for that. Similarly paying it monthly is a false economy - save the money needed and do it six monthly or annually. I have to say I agree that you can't currently afford to run the car - it's currently costing you in excess of £200 a month before you consider fuel which reduces your earnings to a level where you can't cover your other liabilities.

    Do you have the option to use free of charge gym facilities at Uni?
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