large debt

annimouse

hi,
my son has recently come home after splitting with his girlfriend and asked me to help get his finances sorted. hes got a lot of debt.
Zopa loan 15.4%, 282 monthly with 16925 left to pay.
AA loan 7.9% 252 monthly with 15073 left to pay
Tesco 7.5% 350 monthly with 22431 left to pay
overdraft running at his limit of 7000.
roughly 200 a month child maintence.
he brings in roughly 450 week but this varies as its seasonal work.
a relative has offered to lend him money , up to 7000, what would be the best way to use this? put some into each loan to reduce repayments, put it into just one and which one or pay off his overdraft, or something else?

Im completely out of my depth so thank you for any help as i dont know how to advise him.

we have opened a second currant accout that will be used for any spare money each week /month for fuel and he has given me his card for the main acc so he cant spend out of that

elsien

Before you decide out how to use it, (and btw, the relative needs to accept there is a possibility he may never see the money again) your son needs to work how he ran up the debts in the first place and make sure it doesn't happen again.
Otherwise he pays off his overdraft with the loan, runs it up again, and ends up owing twice as much as when he started.

What's the interest rate/charges on the overdraft?

DCFC79

annimouse wrote: »

hi,
my son has recently come home after splitting with his girlfriend and asked me to help get his finances sorted. hes got a lot of debt.
Zopa loan 15.4%, 282 monthly with 16925 left to pay.
AA loan 7.9% 252 monthly with 15073 left to pay
Tesco 7.5% 350 monthly with 22431 left to pay
overdraft running at his limit of 7000.
roughly 200 a month child maintence.

I agree with the advice already posted.

If it were me I would get rid of the overdraft as it can be recalled at any time.

You say he earns £450 a week and its seasonal, is there anyway he can get something more permanent. Is it possible he could take on a second job, what were the loans for ?

annimouse

the arranged overdraft charge is £6.00. and i cant just find the interest rate but i think its around 11%.

sourcrates

Hi,

I fear the 7k from the relative will just be swallowed up in the mire, and not really benefit him at all, but if it has to go anywhere then I agree the OD is probably best paid off, as the charges on a 7k OD must be horrendous.

That should free up the bank charges that should be used to save up an emergency fund, that could be used instead of relying on the OD in future.

The 55k in loans is something he should avoid ever repeating to be honest.

annimouse

dcfc79 he is working at lease a 12 hour day at the moment, he on weekly pay atm but changing jobs and will be monthly then.

A4445

I’m really surprised he could get that amount of loans on that kind of salary. I’ve never heard of a 7k overdraft before? Is it Natwest as they charge £6 per month plus I believe 18.9% APR.

After all that is paid and the overdraft interest I roughly worked out he has only £650 left to live on.

I think some advice from a debt charity is needed. This must be very stressful for you.

Unfortunately I’ve been in this situation. With a similar debt but mostly on credit cards. I lost my job and it came crashing down. After advice I had to declare bankruptcy. It’s not an easy thing to do.

Grumpelstiltskin

A4445 wrote: »

I’m really surprised he could get that amount of loans on that kind of salary. I’ve never heard of a 7k overdraft before? Is it Natwest as they charge £6 per month plus I believe 18.9% APR.

After all that is paid and the overdraft interest I roughly worked out he has only £650 left to live on.

I think some advice from a debt charity is needed. This must be very stressful for you.

I know we have to be supportive but as said how on earth did he manage to get all that credit and what did he spend the money on?

JCS1

Are any of the debts joint?

I agree, that level of debts you're going to need professional advice. I suggest getting all paperwork together and contacting a free debt charity. If that is a bit daunting to begin with, Stepchange have a debt remedy tool on their website which may give ideas.

D_M_E

If he was named on the energy/water/council tax/landline bills he needs to ring the relevant companies/council and tell them he's moved out as from xxx date and is no longer responsible for the bills as from that date - if he can, go back to the property and get meter readings and give them when he phones.

As for the £7000 - agreed clear the overdraft and also tell the bank to make it an arranged facility of not more than £100 or remove it completely.

Good idea to keep his card to stop spending, but have to ask is the £450 before or after tax and can he increase, even if only by £20, the monthly payments on at least one of the loans to save a bit of interest?

JCS1

I would hold off doing anything with the relative's money for a short while. Especially if you end up considering an IVA or Bankruptcy. If Bankruptcy is decided, the relative could pay the fees for that.