Helping partner out of debt

Pantobabe

Hi there,

We are just in the process of buying a house (in my name) . My other half has been in debt since uni when he took out payday loans which then spiralled, and he has trying to repay his payday loans and phone bill defaults of around £10,000 however he doesn’t seem to be getting anywhere. he is paying so much off a month on interest etc that he is then left short at the month and is borrowing again to make payments or having to default (I was not aware of this until today when he broke down and asked me for my help)

I’m not too familiar with pay day loan companies and repaying large amounts of debt off, but I am quite sensible with budgeting and have never had debts, paid off my credit card every month, saved well (how I managed to save the deposit for our first home) so have said that I will help him. As much as I want to wring his neck for being so stupid for taking out payday loans in the first place and letting it get this bad before asking for help, I really want to help him get out of this situation so we can have a fresh start and look forward to our first home together. He has admitted that he wanted to sort it all himself but it’s just got too much and he doesn’t know what to do.

Could anyone advise me of the best course of action we could take to repay this off? He has obviously tried the ‘pay as much as possible to each payday loan company’ approach but they have been taking out £1400 from his £1600 monthly salary and he can no longer live like that. Would it be worth setting up a debt management plan through stepchange?

Thanks so much for your help

benten69

First thing I would do is see if the interest can be frozen. I'm not sure on all the ins & outs, but if you do a search I'm sure there are ways for you to get them to stop adding more interest, as it sounds like at the moment all his payments are just covering the interest (if that) and not really reducing the balance.

If he gets in touch with each lender and gets the interest frozen and a payment plan out in place that he can afford and overpay where possible if he happens to pick up some overtime or something occasionally, then that will at least allow him to start reducing his debt slowly instead of just paying a load of money on interest and not actually reducing the balance.

National_Debtline

Hi Pantobabe,


I would actually suggest that the first thing he needs to do is cancel their ability to access his account. Payday loans set up a continuous payment authority as part of their contract which allows them to take payments even after the direct debit it cancelled. A payday loan is no more important than any other credit debt and they will be treated the same when he comes to negotiate, but before he can negotiate with them, he will need to cancel their ability to access your account. We have a sample letter to help - https://www.nationaldebtline.org/EW/sampleletters/Pages/Withdraw-your-continuous-payment-authority-from-your-card-issuer-%28sole-name%29.aspx


Once he has done this, he can do a SOA to look at what he can afford to repay to the debts. This may be trickier for him to do when your circumstances are about to change but he will need to adapt it as the situation adapts. He needs to look at what money he contributes to the household bills (including things like fuel, food, clothes etc) and then use the money remaining to set up payment plans. He could do this himself or through a free Debt Management Plan (DMP). It is important not to use a fee charging company.


The only other thing to be aware of is that if you have anything in joint names (i.e. a joint account) you will have created a financial association between your credit files. This means your credit files can influence each other and his may negatively impact on yours.


Laura
@natdebtline

enthusiasticsaver

I think a DMP sounds like it should be considered and some great advice from Laura above.

Get him to ring stepchange and cancel all the direct debits, CPAs for payday loan companies and any credit cards.

Contact his lenders to ask for interest to be frozen to start sorting this out.

Don't open any joint accounts with him as this will affect your credit history.

Get him to do an soa http://www.stoozing.com/calculator/soa.php

Help him with doing a budget and setting up a saving account as he will have no access to credit during a DMP. He will need a new basic bank account.

spongebob1913

Hi, it all depends I think on how well you know your partner. Plenty of other posters are talking about Management plans, of which I have no experience with, so cannot help with that -- however - lets look at a few bits


1 - PPI. Has any of the debt he had included PPI? check this immediately. When I was in trouble years ago, I claimed back PPI - threw it straight back at the debt and it made it more than manageable.


2 - shift the debt - is it possible he could pay any of it off, or balance transfer any of it in any way?


3 - would you be willing to wait until you have the house and take a loan out for consolidation? - this one is the tricky one, it depends on how well you trust him, know him, and believe he will pay you back. once a homeowner, you will easily access better rates for credit cards and loans, so could probably take a loan out in your name for his debt. but obviously that's on the assumption he will pay you back. When me and my partner moved in together she had a terrible situation, I ended up paying it all off from my savings and she paid me back. she learned from the mistake, now she has over 4k of savings herself on a student salary - so I'm really impressed!

enthusiasticsaver

Don't do option 3 above. This forum is littered with people who paid off partners debt then partner leaves them. No one ever thinks it will happen to you but it does, many many times. Consolidation also teaches him nothing about managing money, he may then run the cards up again.

enthusiasticsaver

Good for your girlfriend though spongebob. It sounds like she really turned the situation round with your help. Glad there are some exceptions to the usual stories on here.

spongebob1913

enthusiasticsaver wrote: »

Don't do option 3 above. This forum is littered with people who paid off partners debt then partner leaves them. No one ever thinks it will happen to you but it does, many many times. Consolidation also teaches him nothing about managing money, he may then run the cards up again.

Well, like I said, should be heavily considered, but definitely shouldn't be ruled out. if they are planning a future / marriage together, this is one of life's hurdles they should jump over together. Obviously you would only have heard of the bad times on the forums, it's much more likely someone will post about a negative experience instead of a positive one! They are together, so there is clearly an element of trust there!

Mnd

:My experience is that when we got together I helped my girlfriend, now wife to sort out her debts 1 by 1.
She was hopeless with money

Fast forward 15 years and she is completely different to her attitude to finances and money management.
She never paid me back! Inc my 50th birthday present! Nice day on the Orient express but from the day we got together we pooled all our finances good and bad. We've got no mortgage or debts, good savings and I'm sat here retired whilst she works and keeps me..:T:T:T
So it can work out for the best
Hope it works out for you

Colum3

When I met my partner he was in a lot of debt, around 40k I think, and didn't bother to tell me about it for over a year! He started a DMP with Stepchange shortly after we met but it was slow going trying to pay everything off.

Couple of things, stepchange were able to cancel interest on most but not all of his accounts so it was a help but not a total success. He ended up with defaults on his credit file, they stay there for 6 years so for those years he was majorly !!!!ed. But they're gone now, as if they never existed.

I helped him pay off the debts, and he's paid me back everything as I kept a record of every payment I made on his behalf (could have gone the other way of course!). I've bought our first house because he still had defaults at the time, and that's something else to think about... If the house is in your name but he's going to live there, he has to sign a legal document saying he has no rights to the house in anyway. Even if he pays money towards the mortgage it doesn't matter he won't be entitled to anything, this was hard for my partner to accept but it was the only way we would have been able to buy a house at the time. Now he's clear of all his troubles when we move we'll get a joint mortgage/ownership.

So are you confident you'll get the money back (assuming you want it back), and will your partner be okay with having no stake in a house that he lives in?