Debt Free Wannabe. Where do i start?

stumac1980

Not sure if this is the right place to put this post, but I am looking for some advice as to becoming debt free. I have an overall debt of £7,500, which i am looking to clear as soon as possible as i am interested in getting out of the rental market and purchase my own property. I have previously been to the bank looking for help in relation to paying off my creditors and also help with a mortgage but on both occasions i have been turned away.
I have basically been given the opportunity to purchase the property that i currently live in from the landlord. The rate that i would be paying would be less than the market value of the property but even still the bank do not wish to help me.
What is the best way to clear my debt and increase my credit score so that i am able to complete the purchase.

Mahsroh

The best way to start would be to complete a Statement of Affairs using the link below and post it on here. People will then be able to give you some advise specific to your situation. 

https://www.lemonfool.co.uk/financecalculators/soa.php
If you’re £7,500 in debt then I’m assuming you have no deposit to purchase a property so unless the landlord is prepared to wait then I suspect you won’t be in a position to buy the particular property you’re currently renting, but post the SOA and you’ll be able to get some proper advice

ryanm8655

For a start I'd recommend filling this out and posting it here:
https://www.lemonfool.co.uk/financecalculators/soa.php
Do you have any savings? Presumably you have a deposit saved if you went to a bank asking for a mortgage?

monetxchange

You have to remember that the bank aren't "helping you" by extending you more credit as your file is obviously poor and you're considered a risky investment in that sense. Even if you clear this debt tomorrow, your file wouldn't magically turn perfect and you'd be eligible for all sorts of mortgages etc. So bear that in mind - you're unlikely to be getting sorted soon enough to buy this property, but buying one is a great goal to focus on in the future.

First off, forget all thoughts of any sort of consolidation loan. It just pushes the debt sideways and in most cases leads to more overspending and thus more debt. Getting out of this situation without using more credit is the first step to understanding how to live debt free.

Then do a SOA. Everyone can help you trim the fat and get debt clearing. You need to get to the route of why you're in debt - not just how to get out of it quickly to essentially take on more debt. Then you need a savings plan to get the deposit stacked up. By then hopefully you'll look better to the mortgage providers.

I've waited to be fully debt free and am saving as much as possible before getting a mortgage. It's been a slog and sometimes gets me down, but god am I glad I didn't rush into it just because I wanted it when my control of my finances were still a mess. One step at a time. You can do this!

RTC87

I'm in the middle of clearing debt and it feels so good having a plan and knowing with time and consistency you will get through it.

A phrase that has stuck with me and is so true... "debt is rarely an income problem, it's usually a budget problem."

The quote sounds obvious but is so true, your first aim needs to be developing a budget and trimming the fat to live comfortably within your means. That, people here will help with following your SOA.

Once debt is cleared to can begin to review your credit score and save for a deposit. Until, as hard as it is, I would hold exploring home ownership.

CreditCardJunkie

RTC87 said:

"debt is rarely and income problem, it's usually a budget problem."

Also working hard on clearing debt and I would 100% agree with the above. I haven't used my credit card since Christmas (paid off the items in Jan). Definitely recommend giving yourself a realistic amount of spending money. It means you will clear debt slower but it is the only way to be successful. Extra income on survey sites like prolific help to pay for extras 😊

ryanm8655

CreditCardJunkie said:

RTC87 said:

"debt is rarely and income problem, it's usually a budget problem."

Also working hard on clearing debt and I would 100% agree with the above. I haven't used my credit card since Christmas (paid off the items in Jan). Definitely recommend giving yourself a realistic amount of spending money. It means you will clear debt slower but it is the only way to be successful. Extra income on survey sites like prolific help to pay for extras 😊

Also agree re: spending money. My debt clearance has sped up massively during COVID but even before then I was making good, steady progress while having a realistic budget for entertainment. You’ve got to have some pleasures otherwise you’ll give up but strict budgeting is the key to avoiding overspending. 

For some, going cold turkey and cutting out all non-necessities might work but I’d say those that can make that work are rare. I’d do that if my debt was small and I could clear it in a month or two but it isn’t sustainable for me longterm. 

I do wish I’d had this much structure to my finances years ago though, would never have been in this mess. 

enthusiasticsaver

stumac1980 said:

Not sure if this is the right place to put this post, but I am looking for some advice as to becoming debt free. I have an overall debt of £7,500, which i am looking to clear as soon as possible as i am interested in getting out of the rental market and purchase my own property. I have previously been to the bank looking for help in relation to paying off my creditors and also help with a mortgage but on both occasions i have been turned away.
I have basically been given the opportunity to purchase the property that i currently live in from the landlord. The rate that i would be paying would be less than the market value of the property but even still the bank do not wish to help me.
What is the best way to clear my debt and increase my credit score so that i am able to complete the purchase.

There is no quick fix to clearing debt. I think you should address that first and deal with property purchases later as presumably you do not even have a deposit. No bank will lend you money to buy a house if you are not putting any of your own money in regardless of whether it is below market value. If you have a poor credit record that makes it even more unlikely you will be offered a mortgage. There is strong evidence that the housing market is heading for a recession anyway which is doubtless why your landlord has offered to sell it to you for lower than you expected. 

First, do a monthly budget and make a plan to gradually pay the debt off and then you will be able to save for a deposit. You will also need savings for costs like solicitors, stamp duty, search and survey costs. You can put an soa up here.

CLL

It's the typical story - being young and naive, I thought I knew it all and that I had everything figured out. Surprise, surprise, I was so wrong. When I was 23, I took out a £15k loan because I was desperate to move out of my Mum's house and in with my boyfriend of 6 years. We were both earning enough to cover the monthly outgoings for a flat and all the bits that come along with living independently. However, about 6 months into moving out, my other half lost his job and was done out of a whole month's pay (around £1,500). We had no way of paying our rent and loan repayment for the month, and so used my Mum's credit card to get through. The thing was, that with the CC payments on top of our regular outgoings, we were now starting to struggle to get through the month. We then started borrowing money from my Mum here and there to get shopping. Then about 6 months after that, my other half was sick and needed to take 8 weeks off work to recover from an operation. He only got SSP and lost around £3,000 in this time. More money was spent on Mum's credit card. We really couldn't keep up at this point, and I had no choice but to take out an IVA to cover my loan repayments and a couple of other little store cards that I was paying off. This brought down our outgoings slightly, but with my other half also on an IVA, things were far from easy at this point. Long story short, we owe around £18k collectively to two IVAs, two of my Mum's CCs and to family members personally 4 years down the line. We have a lot of pressure to meet repayments for all facets of our debt but the totals just don't feel like they're going down. I spend hours every month looking at our budget spreadsheet, looking at anywhere we can possible scrimp and save, but as time is going on, the situation is having more of a negative impact on our moods and our relationship is beginning to strain. I know that it isn't going to be easy to clear what we owe, but I am now at breaking point and would love to hear if anyone has been in a similar situation and how they have dealt with it?

Andyjflet

CLL said:

It's the typical story - being young and naive, I thought I knew it all and that I had everything figured out. Surprise, surprise, I was so wrong. When I was 23, I took out a £15k loan because I was desperate to move out of my Mum's house and in with my boyfriend of 6 years. We were both earning enough to cover the monthly outgoings for a flat and all the bits that come along with living independently. However, about 6 months into moving out, my other half lost his job and was done out of a whole month's pay (around £1,500). We had no way of paying our rent and loan repayment for the month, and so used my Mum's credit card to get through. The thing was, that with the CC payments on top of our regular outgoings, we were now starting to struggle to get through the month. We then started borrowing money from my Mum here and there to get shopping. Then about 6 months after that, my other half was sick and needed to take 8 weeks off work to recover from an operation. He only got SSP and lost around £3,000 in this time. More money was spent on Mum's credit card. We really couldn't keep up at this point, and I had no choice but to take out an IVA to cover my loan repayments and a couple of other little store cards that I was paying off. This brought down our outgoings slightly, but with my other half also on an IVA, things were far from easy at this point. Long story short, we owe around £18k collectively to two IVAs, two of my Mum's CCs and to family members personally 4 years down the line. We have a lot of pressure to meet repayments for all facets of our debt but the totals just don't feel like they're going down. I spend hours every month looking at our budget spreadsheet, looking at anywhere we can possible scrimp and save, but as time is going on, the situation is having more of a negative impact on our moods and our relationship is beginning to strain. I know that it isn't going to be easy to clear what we owe, but I am now at breaking point and would love to hear if anyone has been in a similar situation and how they have dealt with it?

Have you looked into Dave Ramsey and the baby steps ? Worth a look on you tube and pod cast