tricky situation for us

Nugents

Thanks for posting, apologies for the figures, my partner manages the monthly payments and when I posted I didn’t double check. To clarify, our minimums are around £1200 and we usually overpay 500-600, so taking away the 450 interest we clear around 1300-1400 per month.

I must say, I feel that your head in the sand comment is unfair. We’re very aware it our situation and we’re both committed to sorting it out. The main bugbear at the moment is the interest. I was disappointed that you picked on my choice of words- “ plodding on” etc and felt that these were somehow indicative of our attitude. I actually do think that we are doing ok- were on top of our payments and we’re making Significant overpayments. Our difficulty is the interest.

We’re both quite happy to be on a 3-4 year debt free journey. We’ve been in debt forever so we know it’s not going to be a quick fix. At the moment we’re still able to have some money for leisure etc. We have children so going totally cold turkey would be unrealistic. We’ve totally cut out foreign holidays, uneccessary clothes shopping etc, but we do like to have a few quid to take the kids for an ice cream, or go for an occasional cheap pub meal etc. We’re also building some emergency savings as we have a dodgy old boiler and a car that wont last much longer!!

We do have a mortgage which costs us 450 per month. Our house is worth 220k and we owe 60k. We decided early on that we wouldn’t consider adding the debt to our mortgage.

enthusiasticsaver

Are you still spending on the credit cards?

Nugents

Hi,

no, we haven't used any form of credit for over 12 months. At the start, a lot of cards were maxed out anyway. They were all cut up, except 1 card that has a small limit for emergencies. We have not used it once and will only do so if something totally disastrous happened!

BabyStepper

Hi there

I just wanted to say well done for seeking help and support with sorting out your debt. I find all the posters on here really helpful and it is definitely worth listening and taking on board the comments.

It sounds as though you can't actually afford to be paying the amount to your debts that you are currently doing. If you are serious about not using credit, you need to put a big chunk of those payments towards an emergency fund, new car fund and a new boiler fund. If you get credit for these things that you need, all your efforts so far will be wasted as the debt will go up again. Only paying off what you can afford is a good start in managing your money better in the long term.

It sounds as though you have a good wage between you to be addressing this but you are right, you are not in the same position as most people on here, most people have nowhere near £50k in debt. It's massive, and with no cushion your position is extremely vulnerable. All it would take would be a big house repair bill, or a change in work circumstances, or something and this would come crashing down. Trying to be more stable financially is a long term project and with such big debt it helps to think about it long term. A boiler at £2.5-£3k, a car costing the same (if you're frugal and get a cheap one) and £1k emergency fund is going to take all of your overpayments for a year at least. You need to figure out how much it costs you to live. and pay for these things as you have been bororowing to meet your needs for a long time.

I have to agree you sound as if you have your head in the sand a bit about how precarious your position is. No matter though, you're here now and we're all cheering you on. Come back with the SOA and we will help some more.

Best of luck.

lindens

Have you used the snowball calculator to play around with figures and to ensure you are paying them off in the best way ie saving the most interest?
https://www.whatsthecost.com

getmore4less

Nugents wrote: »

Thanks for posting, apologies for the figures, my partner manages the monthly payments and when I posted I didn’t double check. To clarify, our minimums are around £1200 and we usually overpay 500-600, so taking away the 450 interest we clear around 1300-1400 per month.

I must say, I feel that your head in the sand comment is unfair. We’re very aware it our situation and we’re both committed to sorting it out. The main bugbear at the moment is the interest. I was disappointed that you picked on my choice of words- “ plodding on” etc and felt that these were somehow indicative of our attitude. I actually do think that we are doing ok- were on top of our payments and we’re making Significant overpayments. Our difficulty is the interest.

We’re both quite happy to be on a 3-4 year debt free journey. We’ve been in debt forever so we know it’s not going to be a quick fix. At the moment we’re still able to have some money for leisure etc. We have children so going totally cold turkey would be unrealistic. We’ve totally cut out foreign holidays, uneccessary clothes shopping etc, but we do like to have a few quid to take the kids for an ice cream, or go for an occasional cheap pub meal etc. We’re also building some emergency savings as we have a dodgy old boiler and a car that wont last much longer!!

We do have a mortgage which costs us 450 per month. Our house is worth 220k and we owe 60k. We decided early on that we wouldn’t consider adding the debt to our mortgage.

I have seem a lot of people go though the process and from what you said it looks like have gone through your spends identified a lot of cutbacks and got a decent surplus and are kind of OK with that which is fine these are your choices and priorities.

Do you have a proper budgeted 4 year plan,

That needs to cover all expenses for those 4 years with a debt free date at the end?

You are happy with that part of your plan so I won't dwell on it.

---

Lets deal with the part you want to sort out the interest.


There are quite a few way to reduce the interest cost and they could be very effective.

Just considering BT cards is not going to be the best option.

If you really want to tackle the interest you need to be open to all the options available.

Even if you are not happy doing a full SOA one for just the debts one(including the mortgage) would be really beneficial to sorting out your interest issue

Looking at all your debts

£450 interest on £50k is around 11%(average) that is very high

A list of the debts with min payment and interest rate would help with a plan.

If we do a simple calculation using £1,700pm paying off the debts

£50k 11% £1,700pm 35 months £8,500 interest

with a proper list we can work out the real cost.

Mortgage should be under 2%
£60k 2% £450pm under 13 years, £7,900 interest over its term.

With your LTV you should still be able to get the debt onto the mortgage for under 2% then with the same payment

£50k 2% £1,700pm 31 months £1,300 interest (paid off 4 months sooner)

You could save £7,200 by adding to the mortgage and pay the debt off quicker.

(now this will be a bit different once the debt profile is known)

You can still look for other ways to get cheaper money to make that interest even lower there will be options that cost less than 2%

As you seem maxed out now to get new options even in a short while(6months) you won't be getting any cards to trnsfer the full £50k.

The real killer for your BT approach is most BT cards have fees
don't forget fees is just interest up front on 0% cards.

if you can gte cards with a fee that still saves over the mortgage you can still get them and overpay the mortgage

Getting totally free money is not so easy these days, a spends CC will have no fees and you could cash flow on to that, but with £50k to sort you have to accept there will be some costs/interest and the mortgage is probably going to be the cheapest and quickest way to deal with this.


if you take 6 months to start getting this sorted with 0% CC you will have already paid £2,500 of the interest, get it on the mortgage and you save over £2k of that.

EssexHebridean

getmore4less wrote: »

With your LTV you should still be able to get the debt onto the mortgage for under 2% then with the same payment

£50k 2% £1,700pm 31 months £1,300 interest (paid off 4 months sooner)

You could save £7,200 by adding to the mortgage and pay the debt off quicker.

Generally speaking, taking unsecured debt and making it secured debt is a very dangerous game to be playing, especially when talking about a family with Children. Your logic regarding the figures is correct, but the lack of security it imparts to the OP's situation makes it a whole other story.

Nugents Does it help if you post a basic SOA - with income detail taken out if you feel happier with that, just essentially a list of household bills? It may be that there are places there that others have experience of making savings, which would then free up additional dosh to throw at the debts? The thing to remember here is very much that you can make the payments "right now" - but what happens if one or the other of you is unable to work, or gets made redundant, for example? How does the picture look then? This is why people are anxious that you tackle it with a degree of urgency. Even six months with belts pulled squeakily tight can make a huge difference if it brings that monthly interest figure down and perhaps enables you to get some of the debt onto 0%.

*edit for typo*

getmore4less

The anti secure model is fine when there clear indicators things are tight and if they get worse defaulting is the only solution thus wrecking the credit history.

The OP says they are fine and have the spending under control.

Sometimes you have to take that on face value and move onto the best way to tackle the debt and not rule out consolidation.

In this case it is the interest that is the big problem for the OP if they can retain income and don't need to default and go token then(subject to the details of the debt) there are options to reduce the cost of debt.

They currently pay £2150+ towards debt securing all of it on a decent rate would have a min ayment around £900 over 12y(ish).
Current min payment is £1650.

There is a lot of headroom to have a decent plan the risk levels are unknown without details.
Eg a consolidation allows a much faster building up of an emergency fund.

The detail on the debt will give a clue what the next step might be.

A full SOA will be better as there may be other options and it will be a lot easier to highlight the risk profile.

EssexHebridean

I'm afraid I disagree getmore4less - there is potentially a lot of national financial instability coming up - with inevitable risks around employment within that. Personally I'd n ot recommend ANYONE to put themselves in the situation of increasing debt secured on their home at this point in time, I just feel that for the next 6 - possibly 12 months, things are going to be too uncertain for the majority of people to run that risk. Hopefully there are other - safer - options for the OP to explore which their SOA - even if they just do that for themselves and not share on the board - will highlight.

BabyStepper

Nobody got into £50k of debt by having a good handle on their budget and their finances. When things have been so out of control for so long, learning to manage is tricky and takes time. We have all said 'oh it's fine, I can afford the payments' as if that made it alright. I think it's called denial. Panicking is not helpful either, but a realistic idea of the journey you face trying to pay down debt, stabilise your finances and learn how much your lifestyle actually costs is very useful. And hard won by lots of us.

Using your mortgage loan like a line of credit to withdraw from then add to whenever you need to is madness, in my opinion. I'm in full agreement with EssexHebridean. Unstable times are here, and are going to get worse. We all need to hang on to our homes. Consolidation just shifts the debt from one place to another. You still have the debt, it still needs paid, and your equity could disappear in a moment if house prices fall. Massively in debt and with many fewer choices in life than you would have if you were debt free.

This is not just a game of numbers. It's an emotional journey involving comfortable habits and routines, motivation, self-worth, delayed gratification and much more. If you shove all the debt on your mortgage you'll miss all the learning. And probably end up in debt again.

Whatever you do OP I wish you all the very best.