Halifax debt - Need Advice

Sanctioned_Parts_List

kgrant wrote: »

I actually had to put tyres on the car last week and that bill stung me. I still haven’t fully accepted the new loan and after all the comments I am still non the wiser.

Apologies in advance for bluntness.

Going back to your original SOA, the amount you have available for debt repayment each month is -£61.50, meaning that even if you pay off none of your debts, you will lose £61.50/month just to maintain your lifestyle. You are starting from an unsustainable position. In servicing your current debts at their current level, you lose £406.50/month.

If you take the Halifax consolidation loan, you move £16,300 of your £17,500 total debt from one interest rate to another. The debt doesn't go away. Your monthly debt servicing overhead reduces from £345 to probably about £300 per month - not to £260, because the loan doesn't cover your complete debt burden and you'll still have to service the £1200 left over, which may cost you about £40/month. That means that you will lose money at the slightly lower rate of about £360ish/month (i.e. debt plus lifestyle losses).

The problem is that you don't have £360/month to service a loan, residual debt and current lifestyle. You have -£61.50/month. It means that you will be repaying your loan with other borrowing, as you'll have no alternative but to use your credit card to pay for fuel and groceries. Your debt will inevitably increase by between 4 and 5 thousand pounds per year unless you take positive action to reduce both the overall debt, and the rate of loss. That's just how maths works.

That means you really do need to sell a car. It means you really do need to get rid of your life assurance plan. It means you really do need to investigate your benefits entitlement, and it means you might have to consider a second job. Your options are fantastically limited, if you want to avoid escalating debt and eventual default.

In summary, it makes no difference whether you take the loan or not. It doesn't solve anything.

kgrant

Thanks for the messages,

I took the loan - it was my only option for consolidation and I totally appreciate to keep paying them all would have resulted in defaults on my profile.

I am now more realistic with spending and due to certain comments I am in a better position. I always was frugal when it came to money but with a young family and “what if” scenarios to account for, I believe it is possible if I cut back on a lot of outgoings hence I plan to stick to my 2nd SOA and then I can keep the car and essentials paid for ✅

fatbelly

That's great and we hope you stick to your second soa. I think the problem we are having is that your first soa looked believable, though excessive in some areas. The second soa looked over-optimistic.

The line

Essential bills - £300

replaced the following

Council tax............................. 70
Electricity............................. 30
Oil..................................... 50
Telephone (land line)................... 20
Mobile phone............................ 15
TV Licence.............................. 12.5
Satellite/Cable TV...................... 20
Internet Services....................... 20
Clothing................................ 20
Road tax................................ 25
Car Insurance........................... 50
Car maintenance (including MOT)......... 20
Other child related expenses............ 20
Medical (prescriptions, dentist etc).... 10
Buildings insurance..................... 20
Life assurance ......................... 120
Presents (birthday, christmas etc)...... 20
Haircuts................................ 5
Entertainment........................... 10
Holiday................................. 100

Total 657.50

and I'm not sure you can take £357.50 out of that.