Help needed for a friend regarding debt

scottyboy84

Hi guys,

 

Hope you can assist me. A good friend of mine is in a real bad place at the moment going through  a messy split still living with her ex and is swamped down in debt after going a bit mad when her Dad passed away, not an excuse but she took out some loans and spent money on credit cards doing up her house, anyway the crux of the matter is she wants to get it sorted once and for all as she’s struggling to get by always being in her overdraft. She has various debts with a total monthly amount of around £776.92 – she has attempted to get a loan from her bank to wipe the whole debt to reduce the monthly payments but her credit rating is in the needs work bracket so they won’t lend it to her, the details of her debts are below;

 

Homeowner no mortage

 

1 loan - £13,225 balance (£231.52 PM)

2nd loan - £9460 (£178.40 PM)

 

Credit card / store cards

 

1st - £1438.54 (£70 PM)

2ND - £2745.75 (£105 PM)

3rd - £1200 (£35 PM)

4th – 1089.43 (£70 PM)

 

HP

 

1st - £638 (£39 PM)

2nd -  £258 (£9 PM)

3rd - £1225 (£39 PM)

 

Rest of £1600 wages go on household bills, council tax, food, insurance etc

 

She is considering Stepchange but would prefer to take a loan out. Any suggestions or assistance would be greatly appreciated.

EimearF

Can she do a full SOA? Consolidation rarely works.
We can make suggestions of saving on the SOA and snowballing options or if a DMP is needed. 

fatbelly

So that's over 30k of debt and monthly instalments of 776.

A loan at that level isn't going to save much, and on her wage I would say it's a non-starter unless she secures it (which she should NOT do). How much can she afford to pay each month from her 1600 salary?

She's a homeowner so she should be looking at a debt management plan in the first instance. Stepchange is a good call.

Is she aware tthat she can voluntarily terminate her HP agreements? What are they for?

You don't have any overdrafts in the debt list. Is she aware that she needs a new bank account, unconnected to her debts?

ryanm8655

Is that wage due to furlough?

Agree re: SOA - tricky to help without a more detailed picture but the fact she has no mortgage suggests there are savings to
be made. She has £823 left over and no mortgage to pay.

What’s the HP for? 

Why is her ex still living there if it’s her house? Has he not been paying bills?

[Deleted User]

Taking out a loan out isn't going to "wipe the whole debt" as the debt would still exist.  There's no way she's going to be able to get a £30k+ loan on that income especially with that level of debt, your friend simply won't meet the affordability criteria.  Pointing her towards Step Change would be the most sensible course of action.

scottyboy84

Hi, thanks for your replies. I’m the person who is after advice I’ve logged in to Scottyboy84s account to reply to you. 

So to explain the situation a little. Me and my partner are no longer getting on and will be going our separate ways once the lockdown is over. We own this house outright with no mortgage, 50/50 split. In the SOA I’ve put the house value as my half and I’ve also put the list of all bills I pay for the house and my own personal debts and the £300 extra income is what is transferred from his account to mine every month and he then takes care of the car, fuel etc from his account as I don’t drive myself. 

I hope that makes sense. If he doesn’t want to buy me out then the house will need to be sold so when that happens I’d be able to pay everything off, but houses take ages to sell where I live so that might be a little while off and I think I’ll really struggle just on my wage with all these debts. I’ve buried my head in the sand about it for a long time but I need to address it and get it sorted. Thanks all 

Oh and I’ve had to miss off the APRs as I have no idea what they are but I will get hold of them all.. 

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.................... 

Monthly Income Details

Monthly income after tax................ 1650

Partners monthly income after tax....... 0

Benefits................................ 0

Other income............................ 300

Total monthly income.................... 1950

Monthly Expense Details

Mortgage................................ 0

Secured/HP loan repayments.............. 89

Rent.................................... 0

Management charge (leasehold property).. 0

Council tax............................. 120

Electricity............................. 50

Gas..................................... 50

Oil..................................... 0

Water rates............................. 50

Telephone (land line)................... 0

Mobile phone............................ 60

TV Licence.............................. 13

Satellite/Cable TV...................... 20

Internet Services....................... 30

Groceries etc. ......................... 200

Clothing................................ 40

Petrol/diesel........................... 0

Road tax................................ 0

Car Insurance........................... 0

Car maintenance (including MOT)......... 0

Car parking............................. 0

Other travel............................ 90

Childcare/nursery....................... 0

Other child related expenses............ 0

Medical (prescriptions, dentist etc).... 0

Pet insurance/vet bills................. 25

Buildings insurance..................... 10

Contents insurance...................... 10

Life assurance ......................... 0

Other insurance......................... 90

Presents (birthday, christmas etc)...... 50

Haircuts................................ 0

Entertainment........................... 0

Holiday................................. 0

Emergency fund.......................... 0

Total monthly expenses.................. 997

[b]

Assets[/b]

Cash.................................... 0

House value (Gross)..................... 37500

Shares and bonds........................ 0

Car(s).................................. 0

Other assets............................ 0

Total Assets............................ 37500

[b]

Secured & HP Debts[/b]

Description....................Debt......Monthly...APR

Mortgage...................... 0........(0)........0

Hire Purchase (HP) debt ...... 2119.....(89).......0

Total secured & HP debts...... 2119......-.........-   

[b]Unsecured Debts[/b]

Description....................Debt......Monthly...APR

Credit card....................1200......35........0

Catalogue......................1440......75........0

Catalogue......................2745......105.......0

Overdraft......................2000......20........0

Catalogue .....................1089......70........0

Loan...........................9460......178.4.....0

Loan...........................13225.....231.5.....0

Total unsecured debts..........31159.....714.9.....-  

Monthly Budget Summary

Total monthly income.................... 1,950

Expenses (including HP & secured debts). 997

Available for debt repayments........... 953

Monthly UNsecured debt repayments....... 714.9

Amount left after debt repayments....... 238.1

[b]Personal Balance Sheet Summary

Total assets (things you own)........... 37,500

Total HP & Secured debt................. -2,119

Total Unsecured debt.................... -31,159

Net Assets.............................. 4,222

[i]Created using the SOA calculator at www.LemonFool.co.uk.

Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]

scottyboy84

fatbelly said:

So that's over 30k of debt and monthly instalments of 776.

A loan at that level isn't going to save much, and on her wage I would say it's a non-starter unless she secures it (which she should NOT do). How much can she afford to pay each month from her 1600 salary?

She's a homeowner so she should be looking at a debt management plan in the first instance. Stepchange is a good call.

Is she aware tthat she can voluntarily terminate her HP agreements? What are they for?

You don't have any overdrafts in the debt list. Is she aware that she needs a new bank account, unconnected to her debts?

Hi, I’ve explained it all a bit more in my post above with the SOA. The HP is for household items, sofa etc... not sure if they qualify for voluntary termination.. Thanks for replying 

Naomim

Am I reading that you pay for all the bills in the house? Council tax, water gas & electricity as these figures look like full amounts and not a 50% share.

Thanks

Naomim

scottyboy84

Naomim said:

Am I reading that you pay for all the bills in the house? Council tax, water gas & electricity as these figures look like full amounts and not a 50% share.

Thanks

Naomim

Hi, yes all the household direct debits are in my name. We were together close to 20 years and I’ve always taken care of everything he’s never had anything to do with any of that. I know it’s a stupid way to do things. Basically I would get paid, all DDs come out then he gets paid 2 weeks later, I transfer 300 from that so I have some money left over in my account. Then from his account there’s approx 500 outgoings every month as he has 2 cars to run and maintain and a loan of his own and I would just transfer money from there if and when I need it. I never realised things were going to end up like this. 

So when we decide if he is buying me out or if the house has to be sold I will need to work out half of everything and separate everything but due to my own personal unsecured debts, the loans and store cards etc I’m worrying I’m going to struggle to keep up repayments. 

I’m getting an additional £1000 in my pay this month bonus and overtime I’m going to use that to pay off one of my store cards. If more overtime becomes available I will do that but just looking for advice on what to tackle first based on my SOA. 

[Deleted User]

The SOA shows a surplus of £238.10 each month.  Do you think that is accurate and are the debts all really at 0%?

enthusiasticsaver

The basic utilities and food come to less than £600 so if you take out £300 from his wages that covers half the household costs so it looks like he is covering 50% of the bills. 
What is the other insurance as £90 is a lot to  come out of a relatively low income?
You can stop the £40 clothing for a while as you probably have enough to not bother buying more for now.  The mobile costs are high and can be reduced when out of contract. Presents could be reduced but you need something in emergency savings and once out of lockdown entertainment unless you really never spend on going out, takeways, coffees out or cinema etc. 

That soa shows you as having £238 spare though so I think you are probably spending more than the soa says. 

As a general rule catalogues are expensive unless you are on 0% so I would cancel all the accounts so you are not tempted to carry on spending on them. Overdrafts are usually around 40% so I think I would tackle that first with your overtime/bonus. Then the catalogues and then credit card and finally the loans.  Obviously if the APRs come up higher than 40% or the overdraft is 0% then reprioritise by paying off the most expensive first.  

The main thing though is to stop yourself going down this route again so closing the catalogues is a must. You also need to get in the habit of saving for emergencies. On the plus side you have no mortgage.  Do not be tempted to put any of that debt on to a secured basis.