A new start but some help needed

ANewStart

I am borrowing the £15,000 of my mum to pay off debt as she didn't like the fact I was paying interest when I don't need to.


I am living with my dad in his spare room so have no bills apart from the sky/internet which is what we agreed.




I am in debt as I had an operation 5 years ago while saving for a wedding and was off work for 7 months unpaid. My ex then also ran up debt on a credit card I said she could use (yes I know that was stupid of me but I didn't think she was going to walk out).


Realistically I would say I will have £1,000 a month to pay debt and I know I can stick to that

MallyGirl

ANewStart wrote: »

Realistically I would say I will have £1,000 a month to pay debt and I know I can stick to that

but don't forget that you would be giving £500 of that straight to your Mum if you went down that route.

Is the £10k loan really 0%? If not then no one can advise till you have corrected that figure.

I would expect that Tesco would be the first to address as the highest (that we know right now), then MBNA

ANewStart

The balance I have shown for the loan is the current outstanding figure which includes interest. There is a payment of 232.50 each month for the next 4 years to clear that.
So the information for the loan is correct




I am going to leave the loan as it is and make its payment each month.


Yes I would be giving £500 back to my mum but remember I would have £15,000 less debt in the list above

Bored

ANewStart wrote: »

The balance I have shown for the loan is the current outstanding figure which includes interest. There is a payment of 232.50 each month for the next 4 years to clear that.
So the information for the loan is correct




I am going to leave the loan as it is and make its payment each month.


Yes I would be giving £500 back to my mum but remember I would have £15,000 less debt in the list above

Your overall debt total would remain the same, however. You would simply be moving the debt from external creditors to a family member and there are additional problems with borrowing money from family. If you couldn't afford to pay your mother back for some reason would she face financial hardship? Would it negatively affect your relationship?

I'm not saying that it is a bad idea and that you shouldn't do it, but do think carefully about the positives and negatives before taking up her generous offer.

On_a_Shoestring

First thing that's stuck out to me is £75 on a mobile phone each month. That's an obscene amount! I pay £35 a month for an iPhone 6 which I got almost two years ago. Is it one mobile or two? If it's just one, can you see if you can reduce the tariff? You can easily get it down by £50 a month and still have a good tariff.

In relation to the mum loan, it could be a good idea - I got a bank of parentals loan for £15k recently too, to pay off my bank loan, which saved me 4K interest over the 5 year term. But the questions that the others have posed are correct. Would your mum be stretching herself too thin? What if you can't pay her back one month? Will it affect her and cause her to run into debt? Have you changed your spending habits to stop yourself just spending the spare cash too?

If you have thought about this and still believe it is the best option, I would tackle the Tesco debt first, and then MBNA.

I would seriously look into the interest rate on that loan, though, loans can be nasty and be a high interest rate. If there is no penalty for early repayment, and if the interest is high, you may as well pay it off early.

Lumanous

Hello, firstly sorry for the long post but wanted to try and give you an idea I'm not in any way an adviser or anything just speaking from my personal calculations etc. for any of this:

Glad you are here and facing it. Have you looked at the Snowball calculator? You can do your own after this but its a great place to start and to get an idea of how it works.

Quick Q - does your overdraft charge you a fee in addition to the interest? Or is it just the interest? E.g. I get charged a fee each month if I am using the od in addition to the interest.


Assuming you have no additional od charges AND assuming your monthly payments provided above are based on the latest payments you've made (May-17) and are minimum payments rather than set values (e.g. will reduce or increase with your balances & accounting for interest), IF you go for the family loan I would pay off in the below order:
- Tesco (pay in full)
- MBNA (pay in full)
- Barclaycard (reduce by remainder of 15k - in addition to monthly payment)

Then assuming you keep £1,075 as your total payment each month (if above assumptions are correct and allowing for your £500 new addition), and if you use any excess from your £1,075 after minimum payments to overpay in the following order (e.g. overpay first until 0 then second until 0 etc.):
- Barclaycard
- M&S
- OD
- Loan (assuming you're allowed to overpay)

Doing it this way if you took the family loan, from my estimate would save you about £7.5k in interest. Your overall debt-free date probably won't change massively (c.1-3 months shorter from what I can see) but you'd save that extra money from interest.

Tis an estimate only and does assume no additional overpayments after the £15k and assumes the £1,075 monthly total payment stays constant, but hopefully gives you an idea of an option if the above assumptions are correct.


I do agree on the Tesco loan, worth checking on the interest as although your current payments account for this you might be able to make a better saving long term on the interest if you know what interest they are charging. But can't tell without knowing the interest rate. Of course also depends if you're allowed to overpay.

Also agree with other considerations about the family loan, I'm sure you've considered this already and spoken with her about it but always good to just consider the backup, e.g. what if they needed it back asap, just worth having a back up plan in mind should the worst case scenario occur (that's what I do - make sure I have a backup plan when it comes to family)

All just my opinions/what I would do Definitely recommend looking at the online Snowball though so you can play around with your numbers yourself (I just like having my own spreadsheet! )

As for the other bills/expenses/entertainment etc - maybe have a look around on the forums for small moneymakers, might help out if you can make a little extra here or there to help you live better along the way. LOADS of good ideas on here

Good luck with your journey

ANewStart

Ive just logged onto my loan account and the settlement figure is £8,573.81

Not sure how it works so not sure if thats how much i need to pay to get out of it.

On_a_Shoestring

ANewStart wrote: »

Ive just logged onto my loan account and the settlement figure is £8,573.81

Not sure how it works so not sure if thats how much i need to pay to get out of it.

Based on my own recent repayment of a £15k bank loan, this is how I think it works...

Your loan figure in your SOA is £10,930. The settlement amount is £8,573.81. If you pay it off now you will save £2,356.19 interest if there are no other fees to pay - check your loan paperwork to see if there's an early repayment penalty. Or it might be easier to give them a call and ask them directly, they should be able to tell you the total amount you would need to pay them if you paid them off today.

ANewStart

I have looked at a snowball plan and have worked out that having £1,000 per month available to pay off debt it will take me 42 months if I use the £15k loan from my mum to pay off:


Tesco (full)
Barclaycard (full)
Overdraft (full)
M&S 8,200 to 6,800 (1,400 off)


That seemed to be the quickest way and shown that at the moment I am paying £379 per month in interest whereas I will be paying £125 in interest if I make the payment above.


Barclaycard often give me offers to transfer a balance to that card for a 3% fee that gives 0% interest for a year so that may be worth looking into if it arises.




Any help or thoughts on all of this is muchly appreciated.
I spoke to my mum last night and she believes I will have the loan from her in July at the latest

Lumanous

Hello,
I would say consider paying off the MBNA after Tesco before BC & OD because the interest rate is higher. Yes it means you won't clear the Barclaycard in full yet BUT you're paying less interest on the Barclaycard so keeping balance on the MBNA and not on the BC or your OD is just costing you more money. You'll still reduce the Barclaycard by a fair chunk (recommend doing this before the M&S).

Overdraft is the cheapest interest and your M&S is cheapest after that so I would leave these both until after the more expensive Barclaycard and MBNA. Will save you money in the long run try to focus on the rates not the balances (it seems wrong at first but it will cost you less in the long run in most cases)

by my estimation:
If you overpay in order Tesco>MBNA>Barclaycard>M&S>OD>Loan you're looking at interest of about 4,400

If you overpay in order Tesco>Barclaycard>OD>M&S>MBNA>Loan you're looking at interest of about 8,089

Over the same timescale

hope that helps

MBNA are also often good at offering 0% transfers so reducing this one might help you out for a balance transfer in a few months time or next year etc.

(p.s. I'm ignoring the bank loan in this case - assuming you'd keep paying it as you are now. You might save even more by overpaying on this sooner but I'm not sure how to work that out without knowing the interest rate)