Please may I have some advice?

Coffeelatte

Hello! Happy New Year to you all. As with a lot of people, the new year has made me want to tackle the debt I have.

Currently I have an overdraft of £1500, credit card debt of £300 and a loan of £2,800 (down from £5k). These are all with NatWest. My current account (with the overdraft) is a Select account. But I also have a Monzo account with which I transfer all of my spending but leave my bills in my NatWest account.

The new overdraft changes have also prompted me to look at my overdraft. I really want to be out of it as it feels like such a cloud over my head. But I’m not really sure what to do.

My loan repayment is currently £100 a month which is manageable and thankfully I don’t really notice that it goes. Would it be sensible to take out a consolidation loan to pay off the existing loan and then pay off my overdraft. Or would it be better to move my bills into my Monzo account (or open a new one) and just use my Select account as any other debt and pay into that?

I’ve got a quote for a new loan which would be £120 per month at 7.9% APR (it’s currently 6.9%APR) over 5 years. This would be a loan of 3K. Or do I get a smaller loan but pay 19% APR? The new overdraft changes suggest the £6 fee is being removed but APR is 39%?

Any advice would be greatly appreciated Thank you.

Willing2Learn

Hi Coffeelatte and welcome to the forum

We do not usually recommend a consolidation loan. This is because it will increase the level of debt if the underlying budgeting problems have not been addressed.

On that basis, please could you post up your Statement of Affairs (SOA) into this thread. This will allow us to see in detail, your income, expenses, debt repayments and assets. When filling out the SOA online form, please remember to click on the 'format for MSE' button near the bottom of the form, before pasting the whole lot into this thread. Thanks

Coffeelatte

Thank you for the welcome Willing2learn

Here’s my SOA (hopefully I’ve done it correctly!) A quick disclaimer that Water is included in my rent.

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 1
Number of children in household......... 0
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 1529
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 1529

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 475
Management charge (leasehold property).. 0
Council tax............................. 81
Electricity............................. 30
Gas..................................... 0
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 0
Mobile phone............................ 34
TV Licence.............................. 13.2
Satellite/Cable TV...................... 0
Internet Services....................... 26.49
Groceries etc. ......................... 130
Clothing................................ 20
Petrol/diesel........................... 85
Road tax................................ 17.5
Car Insurance........................... 50
Car maintenance (including MOT)......... 10
Car parking............................. 0
Other travel............................ 10
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 4.2
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 20
Haircuts................................ 10
Entertainment........................... 100
Holiday................................. 20
Emergency fund.......................... 0
Total monthly expenses.................. 1136.39


Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 2500
Other assets............................ 0
Total Assets............................ 2500

No Secured nor Hire Purchase Debts

Unsecured Debts
Description....................Debt......Monthly...APR
Loan...........................2870......98........6.9
Credit card....................300.......100.......0
Total unsecured debts..........3170......198.......-


Monthly Budget Summary
Total monthly income.................... 1,529
Expenses (including HP & secured debts). 1,136.39
Available for debt repayments........... 392.61
Monthly UNsecured debt repayments....... 198
Amount left after debt repayments....... 194.61

Personal Balance Sheet Summary
Total assets (things you own)........... 2,500
Total HP & Secured debt................. -0
Total Unsecured debt.................... -3,170
Net Assets.............................. -670

Created using the SOA calculator at
Reproduced on Moneysavingexpert with permission, using other browser.

CanadianDream

You don't need a new loan, with the £190 odd left over each month you can use that towards your current debts. You will be debt free within 2 years.


How did you get into debt in the first place?

elsien

So do you actually have £190 left each month?
If you wanted to you could also cut down the grocery spends and the entertainment in the short term and chuck that at the overdraft.
No emergency fund though - there should be something in there so you don't need tn add unexpected spends onto the credit card, such as new tyres fur the car, or whatever. You've not got much in there for servicing.

Coffeelatte

Thank you for taking time to reply CanadianDream.

My overdraft is a hangover from my student days annoyingly. I graduated 5 years ago and never quite made it out of it. Really hate living within it.

Coffeelatte

@elsien So do you actually have £190 left each month?
If you wanted to you could also cut down the grocery spends and the entertainment in the short term and chuck that at the overdraft.
No emergency fund though - there should be something in there so you don't need tn add unexpected spends onto the credit card, such as new tyres fur the car, or whatever. You've not got much in there for servicing.

This is the thing, the £190 it says I have left over is such a surprise! I’m not really sure how that is.

I tend to go further into my overdraft when I have an emergency which is a habit I really need to break. This is why is was contemplating a loan or another bank account.

jen49

you forgot your overdraft in your SOA and paying buildings insurance - your landlord would pay that on rented property but no contents insurance is this right?

elsien

Have you tryed keeping a spending diary to see where your £190 is going. Often it's the smaller things that add up that you don't really think about.
Consolidation loans only work if your budget is accurate and you're able to stick to it. Otherwise the emergency spends still end up on the credit card and you end up with two debts instead of one.

Where's the overdraft on your SOA and what interest rate is it carrying?

Coffeelatte

@jen49 you forgot your overdraft in your SOA and paying buildings insurance - your landlord would pay that on rented property but no contents insurance is this right?

I did, apologies! I wasn’t sure what repayment to put as I live within it!

Aah yes, the £4.20 should be contents insurance.

Willing2Learn

Hi,

Do you really have £190/month surplus?


My thoughts on your SOA:

• Is your electricity really only £30/month? (Seriously low when you have no gas)
• Mobile at £34/month is quite high. Have you considered a cheap SIM-only deal?
• Clothing @ just £20 means you are spending just £240 annually on clothes. Is this accurate?
• Your car maintenance at £10/month (incl MOT) is just unrealistic...
• You need to put money aside each month for your Emergency Fund
• Overdraft and it's monthly fees are not listed.

Also, if you are putting money aside each month for clothing, car maintenance, holiday and presents, then there should be a lumpsum squirrelled away and listed on your SOA as a cash asset.

So, back to my original question: Do you think your SOA is realistic? If you have the £190/month budget surplus then clearing your debt should take no time. But I don't really believe you have that £190/month surplus.