Newbie looking for some advice

Fenris85

Hi all,

We are in the situation wherby we have run up £82k worth of non-priority (unsecured) debt and an additional £38k worth of priority (secured) debt....plus obviously a mortgage.

Our monthly outgoings to cover the debt alone is around £3500 plus the mortgage and living expenses (the total for outgoings per month is £6200).

We have no arrears at the moment but cannot keep up with the payments on all of the debt (mainly credit cards) so we have approached the CCC (Consumer Credit Council) and we are looking at a DMP (Debt Management Plan) which looks to offer a pro-rated amount to my creditors... The monthly payment to this plan is £1165.

We've been through a budget with the CCC and with £5200 a month coming in to the household, the priority debt, the living costs etc this seems to be about right...

My concern is that this means that for the next 6 years we will have NO opportunity for anything that's not on the budget sheet and that was a fairly strict set of items defined by the CCC. On the positive side it would mean we'd be debt free in 6 years (although our credit rating would be pants!)

We've been offered a £100k consolidation loan (by the dreaded Firstplus) which would pay the vast majority of the debt (including the priority (secured) loan we already have with firstplus). The monthly payments are affordable £1165 per month as opposed to the £3500 we currently pay but obviously the term of the loan is a pain (25 years) at 9.7% APR (variable).

In real terms what it means is that we'd go from a £1000 a month deficit to a £1000 a month surplus BUT we'd owe even more money (just spread over a longer term) plus obviously it's secured on the home (so our opportunities if things change in the future are limited).

We're both in our early 40s so a 25 year term is still "OK" from that perspective but we're torn between a "struggle like mad for 6 years" or a "have an affordable monthly cost and reasonable standard of living for the next 25 years" and really can't decide which is the best option.

In real terms the firstplus option means a £10k a year pay cut for me - which to be fair we could manage, we're deeply concious that our combined monthly income is significantly higher than most of our friends and they all seem to manage far better than we do so it probably wouldn't be that big a deal...

so that's us - we're stuck with one of the biggest financial decisions we've ever had to make and really don't know what to do.........

Larumbelle

I can't really offer much genuine 'advice' more just a 'what I'd do in this situation'. I've just read this through and hope you will see it in the spirit of friendly help in which it is offered, not just preachiness...

I know it's daunting, but I really do think you are better off biting the bullet and going without for a few years.

Easy for me to say? Well, yes and no. Although my situation isn't as extreme I have been without anything not on my budget sheet for over two years now. (my entire salary is less than the £1000 you want free to 'play around with'.) I do find it tough at times, but nowhere near as tough as I thought I would. I have the luxury of knowing that this isn't 'forever', and that one day I will have an okay lifestyle that many people will never have, not because of debt but because of poverty.

It sounds as if you're reluctant to make the real changes that you need to turn things around. Six years is a long time, but twenty five is even longer! That extra cash won't help you to sleep at night, won't stop you knowing that you are still one step from financial disaster and could lose you your house.

Right now you presumably still have your health. Do you know that you still will in your early sixties? What if one of you got ill or had to retire early? Payment protection often offers very little when it comes down to it.

What's more you need to break the cycle of feeling that you 'need' things that really you just 'want'.

Well done for approaching the help that you need, and for recognising that you can't carry on the way things are at the moment. I think you already know what you have to do, you are just a little scared of doing it.

Try not to see it as a straitjacket, try to see it as a short-term compromise for long-term gain. If you are worried, or finding it hard, keep posting here. We are primarily a mutual support and encouragement board for people all going through similar things, and when you find it hard, knowing that other people have survived the same thing can mean a lot. :hello: