1st post - would appreciate any help and advice

lookingforadvice1

Hi All,

This is my first post, I will try to give a summary of how we got into this position.

In 2012 myself and my then girlfriend got engaged - at the time we had about 3k of debt between us/ Over the next year we saved up 12k for our wedding and didn't use any credit to fund wedding however we did use borrow 3k for the honeymoon, increasing our debt to 6k.

After the honeymoon we decided to save for a house. Over the next 2 years we saved over 12k and my parents lent us an additional 5k ( total debt now 11k)

We moved in Jan 2016 into the new home - the house needed some improvements so we got a loan out for 15k (17.5K) with interest. Looking back this was huge mistake now.

My wife really wanted children straight away, but I wanted to see some more of the world first,
so we comprised on a 4 week trip to the USA and Canada in August 2016 ( another 2k on a credit card) and to start trying for a family in September. Total debt was now circa 28k, Although rather large - I thought this was manageable on a joint income of 3500 a month after tax with the credit cards that were on Interest free promotions.

We started trying for baby in September - in my head I didn't think it would happen for 3-6 months so we could start trying to save again, but the first month of trying my wife fell pregnant.

This is where our financial difficulties started to appear. My wife was severely ill from 2 imonths into her pregnancy requiring frequent hospitalisation due to hyperemesis gravidarum ( severe morning sickness) so her wages fell from 1400 a month to statutory sick pay which crippled us as well as trying to buy baby stuff, I just put any expenses we couldn't afford onto credit cards- the credit cards companies had increased our limits frequently in the last 2 years. We had the baby and then my wife was only on statuary maternity, by the end of my wife maternity we had amassed even more credit card debt, now in the region of 19k. the loan has reduced to 9k

My wife is now back at work (part time) and we are in surplus again per month. but the credit card promotional balances had ended. So I planned to apply for 2 new ones to shift the debt with a balance transfer. To my horror, both my applications were declined. Both our credit ratings were usually comfortably in the 900s before my wife had the baby, but when I checked after the applications mine was 845! even though I have never missed a payment.

I think I have 4 options which I have listed below and would appreciate any comments advise on which will be the best strategy.

1. Use the £500 a month to pay down the credit cards. I can put up without any luxuries, but I don't want to deprive my wife and daughter of things. (4-5 years to clear debts)

2. Wait 16 months and remortgage to clear the debts( assuming house price at least stays the same and assuming the bank will approve this?

3. Sell the house and pay off all the debt- move in with my parents for 3-6 months and use the remaining 30k for a deposit on a new property ( a lot of hassle especially with a young child)

4. Take out a secured loan for 17k to clear the credit card debt. I am least keen on this option.

I have pasted the SOA below- it says we have about £650 surplus- but it feels like less than £500 some months

Statement of Affairs and Personal Balance Sheet

Monthly Income Details
Monthly income after tax................ 2100
Partners monthly income after tax....... 975
Benefits................................ 89
Other income............................ 0
Total monthly income.................... 3164

Monthly Expense Details
Mortgage................................ 495
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 130
Electricity............................. 50
Gas..................................... 35
Oil..................................... 0
Water rates............................. 40
Telephone (land line)................... 0
Mobile phone............................ 30
TV Licence.............................. 10
Satellite/Cable TV...................... 0
Internet Services....................... 25
Groceries etc. ......................... 350
Clothing................................ 50
Petrol/diesel........................... 90
Road tax................................ 2
Car Insurance........................... 37
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 160
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 10
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 150
Haircuts................................ 25
Entertainment........................... 50
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 1739


Assets
Cash.................................... 0
House value (Gross)..................... 210000
Shares and bonds........................ 300
Car(s).................................. 4500
Other assets............................ 0
Total Assets............................ 214800


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 148000...(495)......1.56
Total secured & HP debts...... 148000....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
cc.............................13000.....300.......20.9
cc.............................4000......90........15.9
cc.............................2000......55........18.9
loan...........................9000......324.......7.9
Total unsecured debts..........28000.....769.......-


Monthly Budget Summary
Total monthly income.................... 3,164
Expenses (including HP & secured debts). 1,739
Available for debt repayments........... 1,425
Monthly UNsecured debt repayments....... 769
Amount left after debt repayments....... 656

Personal Balance Sheet Summary
Total assets (things you own)........... 214,800
Total HP & Secured debt................. -148,000
Total Unsecured debt.................... -28,000
Net Assets.............................. 38,800



Many thanks for any help.

Dobbibill

lookingforadvice1 wrote: »

Hi All,

This is my first post, I will try to give a summary of how we got into this position.

I think I have 4 options which I have listed below and would appreciate any comments advise on which will be the best strategy.

1. Use the £500 a month to pay down the credit cards. I can put up without any luxuries, but I don't want to deprive my wife and daughter of things. (4-5 years to clear debts) This is your solution with amendments

2. Wait 16 months and remortgage to clear the debts( assuming house price at least stays the same and assuming the bank will approve this? No - do not move unsecured debt to secured debt - if you were to have a run of bad luck, lose job etc again you are then risking the roof over your head.

3. Sell the house and pay off all the debt- move in with my parents for 3-6 months and use the remaining 30k for a deposit on a new property ( a lot of hassle especially with a young child) No - this is not necessary, you have a surplus in your budget so you need to throw every spare penny at the debt.

4. Take out a secured loan for 17k to clear the credit card debt. I am least keen on this option. No - as above.

I have pasted the SOA below- it says we have about £650 surplus- but it feels like less than £500 some months

Statement of Affairs and Personal Balance Sheet

Monthly Income Details
Monthly income after tax................ 2100
Partners monthly income after tax....... 975
Benefits................................ 89
Other income............................ 0
Total monthly income.................... 3164

Monthly Expense Details
Mortgage................................ 495
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 130 is this over 10 months, ask your council to do it over 12.
Electricity............................. 50have you done a comparison lately to see if you are on the best deal?
Gas..................................... 35 as above - make sure you are on the best tariff.
Oil..................................... 0
Water rates............................. 40 is this metered or over 10 months - as above ask for 12 months if it is.
Telephone (land line)................... 0
Mobile phone............................ 30
TV Licence.............................. 10 this is £12.37
Satellite/Cable TV...................... 0
Internet Services....................... 25
Groceries etc. ......................... 350 this is alot for 2 adults, 1 child - switch brands/stores and batch cook from scratch - see the old style board.
Clothing................................ 50 minimise this to bare essentials until you are debt free.
Petrol/diesel........................... 90
Road tax................................ 2
Car Insurance........................... 37
Car maintenance (including MOT)......... 0 you never buy wipers, tyres, pay for an MOT, oil change etc
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 160
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 10
Contents insurance...................... 0 is this covered in your buildings ins above?
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 150 this is too much, cut back
Haircuts................................ 25 this is alot for haircuts - go more weeks between visits and/or change to using a local college
Entertainment........................... 50 find more free things to do
Holiday................................. 0
Emergency fund.......................... 0as a homeowner, you need something in here
Total monthly expenses.................. 1739


Assets
Cash.................................... 0
House value (Gross)..................... 210000
Shares and bonds........................ 300
Car(s).................................. 4500
Other assets............................ 0
Total Assets............................ 214800


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 148000...(495)......1.56
Total secured & HP debts...... 148000....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
cc.............................13000.....300.......20.9 tackle this one first as it has the highest APR.
cc.............................4000......90........15.9
cc.............................2000......55........18.9
loan...........................9000......324.......7.9
Total unsecured debts..........28000.....769.......-


Monthly Budget Summary
Total monthly income.................... 3,164
Expenses (including HP & secured debts). 1,739
Available for debt repayments........... 1,425
Monthly UNsecured debt repayments....... 769
Amount left after debt repayments....... 656

Personal Balance Sheet Summary
Total assets (things you own)........... 214,800
Total HP & Secured debt................. -148,000
Total Unsecured debt.................... -28,000
Net Assets.............................. 38,800



Many thanks for any help.

See my comments in red.

Cutting back and doing free things is not depriving your OH or LO. As a family you are a team and as such all need to make small sacrifices now for the future.

Throw every penny at the debt with the highest APR as well as the minimum payment. It will start to chip away quite quickly with the excess you have in the budget if this is accurate.

All the best

National_Debtline

Hi there and welcome to MSE,


A good SOA is essential here. You maybe able to make some cut backs, but you also need to ensure you have budgeted sufficiently for things as well. Emergency funds, MOTs, insurances are all essential as a home/ car owner so make sure you start to have a regular budget for these (otherwise there is a risk you will revert back to using credit again, which we want to avoid). If you feel that you don't have quite as much surplus as your budget is showing, then check your bank statements and receipts, you may have missed or under budgeted for something.


Moving house is expensive (solicitors, estate agents and then stamp duty when you buy a new house) so this may not give as much of a yield as you think, and isn't actually necessary in your situation. I also think that turning unsecured debt into secured debt is risky. You can speak to an independent financial advisor, but I agree with Dobbibill that if your circumstances were to get worse, it idea would then risk the house.


It would appear that overpaying is a good option right now, and then potentially looking into new financial deals in 12 months time when the declined searches come off your credit file.


Laura
@natdebtline

Mumoffourkids

The two main areas I can see that you can cut back on are groceries and presents.

I have six kids and I spend £400 a month on food for all of us. This includes packed lunches for me and four of the kids, nappies for two children and all cleaning stuff, washing stuff and toiletries.

In addition, I budget £150 for presents each month but my family is far bigger than yours. I also don't spend all of that on presents. It goes on presents for birthdays and christmas for my kids, presents for parties that my kids get invited to, christmas food and outings, presents for family for christmas and birthdays and I still manage to have money left. My eldest daughter is 16 on Saturday and yes I have spent a bit more on her this year than I would do normally but it is still within my present budget.

If you don't feel like you have the £650 spare each month, then you need to keep a spending diary for everything you spend on. This will then show you where you are spending money.

lookingforadvice1

Thanks all for the replies,

3 monthly expenses I missed were
£9.99 Netflix
£3.00 Xbox Live
£12.00 Charity direct debit.

In response to my SOA -

Council tax............................. 130 ....... this is over 12 months
Gas and Electric tariff ..... runs out in June. will do comparison this month
Water - is not metered
Groceries etc. .......... 350 - I agree I can probably reduce this to 300- I do make a lot from scratch, and very rarely eat out.
Car maintenance (including MOT) ...... My brother in law owns a garage - and doesn't charge me for small expenses
Contents insurance........... I don't have contents insurance
Presents (birthday, christmas etc)...... 150 My wife has a large immediate family and I've also included wedding and christening gifts within this figure
Haircuts.................. 25 This is combined - I get a haircut every 5 weeks by wife every 3 months.


The issue that is most bothering me is the thought of paying interest on the credit cards as I have always been able to balance transfer.
I understand that this will reduce the faster I can pay off the balances, but at what point will I be deemed less risky to credit companies.... 15k? 10k? 5k? .

Many thanks again

Oakdene

lookingforadvice1 wrote: »

Thanks all for the replies,

3 monthly expenses I missed were
£9.99 Netflix
£3.00 Xbox Live
£12.00 Charity direct debit.

In response to my SOA -

Council tax............................. 130 ....... this is over 12 months
Gas and Electric tariff ..... runs out in June. will do comparison this month
Water - is not metered
Groceries etc. .......... 350 - I agree I can probably reduce this to 300- I do make a lot from scratch, and very rarely eat out.
Car maintenance (including MOT) ...... My brother in law owns a garage - and doesn't charge me for small expenses
Contents insurance........... I don't have contents insurance
Presents (birthday, christmas etc)...... 150 My wife has a large immediate family and I've also included wedding and christening gifts within this figure
Haircuts.................. 25 This is combined - I get a haircut every 5 weeks by wife every 3 months.


The issue that is most bothering me is the thought of paying interest on the credit cards as I have always been able to balance transfer.
I understand that this will reduce the faster I can pay off the balances, but at what point will I be deemed less risky to credit companies.... 15k? 10k? 5k? .

Many thanks again

You should be able to get that figure to around or below £200. I currently spend £130ish a month for me & my teenage daughter, & my son every other weekend. Could you shop at a cheaper supermarket?

marliepanda

Get rid of the charity DD. Charity begins at home. Youre spending £144 a year on something you cannot afford with 28k of debt.

Golightly72

Good advice on the SOA, I would just say that if you do have £500 to throw at the debts, I would clear credit card 3 first, with the £2000 balance, and a not much lower APR than credit card 1, which will take so much longer to shift.

It would be gone in 4 months; if you keep the card open, depending on which one it is you may then get a decent 0% transfer offer that you can at least shift some of the higher APR debt to.

Then shift credit card 2, so in 12 months you could have two credit cards gone and hopefully some better offers, either from those cards, or you might be a better prospect for some better offers.

I wouldn't worry too much about the loan for now - let it tick on until you have cleared the cards.

chelseablue

We're also a family of three, 2 adults and a 3 year old son.

I shop in Aldi and spend about £200 a month, do you have a Aldi or Lidl near you?

ReadingTim

lookingforadvice1 wrote: »

I can put up without any luxuries, but I don't want to deprive my wife and daughter of things. (4-5 years to clear debts)

No. As an entire family you need to learn to live within your means. No-one's being deprived - you've got food, shelter, heat, clothing etc, but money doesn't grow on trees and you can't always have everything your heart desires, especially if costs money to buy it.

zippygeorgeandben

You may think that ReadingTim is being a little harsh but I second what he says. What actually is deprivation?
You also state 'This is where our financial difficulties started to appear.' midway through your post. You should analyse your position before you got into difficulties. I can't speak for everyone on MSE but you had to borrow money to fund honeymoon etc because you didn't have the funds so you created financial difficulty in 2012.
Make this be your lightbulb moment and you might find that not being able to shift balances help you get your head out of the sand.
Good luck :T