Need some debt help!

scoobydriver

Hello,

Need a bit of advice clearing £13K of debt. 3 cards, an overdraft and a loan for a car.

Monthly income is £1700 family of 3.
£3000 overdraft so never hit the black.
£4000 on an MBNA card that has jumped from £50 to £90 a month
£2500 on a Marbles card thats £55
£500 on a Barclays card which is £20 although interest free
£3000 With Tesco for a car loan at about 7% odd

Problem we have is that we just keep running out of money before the end of the month and have to borrow more just to get to the end of the month.

Our gas and electricity bill has jumped to £104 which has also taken its toll.

Now and again I receive commission from work and we have a christmas bonus. I am going to attempt to clear the overdraft to at least £500 over the next 2 months irrespective of christmas. What I need is a temporary help to reduce the payments in the remaining £10K which will mean us getting to the end of the month and me using the comission I receive to pay off the £10K.

I have an Egg credit card with a £6K limit and had planned to put £6K of my debt into that end of January as it has its 6 month interest free period. The problem with the MBNA card is that as the total owed is £4000 I can't move the lot to an interest free card as they won't give me enough credit to cover it. However this won't reduce the monthly payments on the whole debt sufficiently for our needs.

I know it sounds very bad but I've been considering somewhere like First Plus. I know they aren't looked on very favorably but I thought what I might do was take out a secured loan of £10K over 25 years without their PPI thats for sure. That will reduce our payments by nearly a quarter which frees up month to month money. The money I get from work as commission can then be held on account by my company until it reaches £10K and I pay First Plus off. Yes its 2 months interest and £150 penalty but the monthly payments are about £70 a month so getting shot of the loan when I can won't cost any more than £300 which isn't too bad. By doing this I could pay this off in 12 months of hard work.

What do you guys think? The commission money is by no means certain but if we can survive on my monthly wage my work will hang on to the money for me. They know I'm struggling so will hold the money for me rather than give it to me when I'll just spend it.

Thanks

mrsspendalot

Noooooo! Don't turn unsecured debt into secured debt!!!!!!

Why don't you post up a full statement of affairs - a list of ALL your income, outgoings, debts (APRs etc) and let us see if we can offer any help and advice.

cat4772

Scooby

provide a full statement of affairs as suggested by Mrs S and the we'll be able to give you some advice. might help to check out the budget planning articles, remember to include the big one-offs (holidays, birthdays etc).

Cat.x

scoobydriver

Life Cover-£18.74
Critical Illness-£13.11
BT monthly debit-£21.00
powergen (gas & leccy)-£104.00
Water-£25.00
Sky-£18.00
RSA House & Contents-£18.13
TV License-£11.61
House maintenance-£19.00

Moblie orange - £35.00
Broadband- £5.00
Car Loan- £61.70
Car Insurance -£36.75

MBNA£100.00
Marbles-£55.00
Barclays-£15.00

Average Monthly Food Bill £200.0
Mortgage-£362.00
Council Tax £54.00
Total outgoings-£1,118.00

Total Income£1,787.00

Minus total outgoings£1,118.04
monthly Disposable Income£668.96

Car Loan is Northern Rock 8.9 £3000 over 5 years
MBNA £4000 @ 2.2071% a month
Marbles £2500 @ 14% PA
Barclays £500 @ 0%

Not sure what the OD is but with Halifax current account and is £3000

Mortgage is interest only on £75000 (house of £150K) about 5.5% variable discount ending May 08. Have no vehicle for paying of capital and want to change to repayment next year meaning even more need for disposable income.

Mrsspendalot - Why not use the secured route? I understand the risk associated with assigning the loan to the house but if I couldn't pay the loan (about £70 a month) then I couldn't also pay the mortgage which would only happen if I wasn't working. Our business is successful and is quite secure.

I've no other way of managing the debt to a very low level that will allow me to attempt to clear the debt in the shortest possible time.

I could get a secure loan to cover the cost but the approximate payment on £10K over 5 years is £200 which is too expensive.

bananakinz

A useful tool is a spending diary - according to the above you have £670 a month disposable - where is this going?

If you play around with the snowball calculator ... I think its at whatsthecost.com and put in your debts and how much you are paying it will give you an idea of when you could be debt free - certainly a lot quicker than 25 years and certainly a lot cheaper.

Could you combine the critical illness and life cover?
Gas, leccy and car insurance seem really high
What about other car costs? petrol mot tax?
Any xmas/birthdays/ clothes?

Hope this helps

dhassen

yea your disposable income sounds pretty good! You must be spending more than you think, or the money would be in the bank at the end of the month.

C32AMG

Haven't yet read the thread in full, but the first point that sticks out to me (as another fast-car driver!) is that a Scooby is not exactly the cheapest car to run! Have you thought about selling it, which'll pay off a portion of your debts.

You could then buy a cheap knockabout which'll be much cheaper to run (fuel, tax, insurance, servicing !) until such time as you are 'back on your feet' financially.

Having been used to a fast car, this might not be an attractive option! (Anything with a 0-60 time of more than 5.5 seconds now feels slow to me! ) but if it helps financially then it might be a sensible plan!

Fortheloveofmoney

Hi There

Welcome to MSE.

I second the comments regarding the spending diary. you need to see where the £668 per month is going. It could be on things such as dentist, hair cuts, presents, going out, car expenses (MOT, TAX etc) that haven't been added to your SOA.

Before going for the secured option check out www.whatsthecost.com. This is a snowball calculator which will help you see the order in which debts should be paid off in order to pay the least interest. It will also show you the difference you'll pay in interest between paying them off as you are and taking the secured loan route.

I've put in your figures from your SOA and i've worked out that if you pay back at the rate you are now (assuming the OD is 15.9% APR) then it will take 106 months or 8 years and 10 months to be debt free. This is obviously a lot quicker than the 25 year secured loan but works out to be more interest.

If you play with the numbers and work out exactly how much money you can afford to throw at the debts each month, you can bring your debt free date nearer and also pay less in interest. Of course the real bonus is not having the debts secured on your home.

At the mo, you say that you are running more debts up each month. i would suggest that the first step is to look through your bank statements over the past few months and work out where you are spending the "spare" £668. This will give you the starting point of writing a complete SOA. Once you know where the money is going post it back up here and the helpful folks will show you where savings can be made.

The interest you are paying on the MBNA card is extortionate. Any chance you could get a lower interest rate witha different provider? If not, have you tried phoning them asking them for a lower rate? You could say you are going elsewhere.

scoobydriver

Although it looks like we have over £600 to spend for the month it doesn't work out like that in reality. Most of the £600 for one month goes to pay back what we've borrowed or taken from the bank in raising the overdraft facility.

Its a never ending cycle. Might have one good month and start off with £600 odd to spend. Something happens or theres an "event" family related or whatever and we run out of that available money sometimes with 2 weeks left until I get paid again. When this happens whatever left over money might be available goes to pay back what we owe last month.

Over the next 12 months I can save £10K (from commission at work and income saving) but I can't do that if nearly £250 is walking out the door when it doesn't need to. I can reduce that £250 to £70 with this secured loan and then pay that off once I've saved the £10K.
I understand over 25 years the secured loan is the most expensive but will be the cheapest IF I can pay it off within a year.

At that point the only debt I will have is my mortgage.

As for my username, I joined a couple of years ago when I had the Impreza. I sold it in August and paid off the loan I took out for it.

Fortheloveofmoney

So by doing this you'd save yourself £180 per month? Whilst it is a good idea to free up some income you will end up in the same position again unless you know exactly where the other money is going.

Have you done a full budget with everything and I mean everything on it? I can't see anything for car expenses, birthdays, Christmas, going out, kids school trips, clothes, dentist, haircuts which must crop up at some point. You may find out that this is where the money is going.

bananakinz

I really do think that a spending diary would really help you, as well as a full SOA. Have you had a chance to look at snowballing??

How about getting a new bank account (via quidco ) and treating the overdraft as a seperate debt - that way you'll see an account in credit and it won't seem do daunting.

Are you entitled to any tax credits?

I think I would also move as much as you can from the MBNA card to the egg card if its at 0% as that would help.