Starting my mission to become debt free - Snowballing advice

ryanm8655

KeysMcK said:

What do you normally include in your diaries, is it just a carbon copy of what I posted here (SOA, plan etc?)

It’s up-to you really.

Think I started with my SOA, a bit of background about how I got into debt, what prompted my LBM etc. A rough plan and some goals in the short term.

I quite often use it to layout my thinking and pose questions.

KeysMcK

Hi!

I went quiet, I'm sorry. This is largely down to my income taking a massive hit, meaning paying down debts above the minimum payments was no longer possible.

I had a change of luck today. I put in a claim about 2 years ago after getting my ROP interest fees re-funded from Vanquis for all ROP payments I'd ever made (their PPI). These were rejected of course, FOS got involved and long story short £2000 landed in my bank this afternoon (all of my ROP payments over a 6 year period, plus any overlimit fees that may not have been added were it not for my ROP charges)...

Now. What to spend it on?! I'll think out loud below.

The obvious would be to use this money to pay off some high interest, low impact debt like Bamboo loans, only £1000 settlement and the interest is astronomical, although I only pay £50 per month which is pretty managable. Another thought is I could pay off the car, the interest isn't too high and I only have about 10 months left, however that's a massive £211 a month which would have a bigger impact short term. 

The third and final option, and the one I'm most likely to do, is pay off my 40% Monzo overdraft completely (£700 overdrawn as of today), and pay off my 26% Capital One credit card completely (£800). This way it feels like an acheivement, and I pay less monthly, however my credit file improves due to my available credit allowance growing, BUT I still have access to my little windfall as an emergency fund while my job is still hanging in the balance.

Interested to hear your thoughts!

CMcK

P.S. The only change to my SOA is I no longer pay any Barclaycard monthly fees, I decided that as it's my highest interest credit card (29%) I will use this for absolutely every purchase and payment I make on a daily basis instead of my debit card. More than my credit limit (800) runs through it monthly so I never actually pay any interest. It's hardly ever fully empty either so reports OK on Experian. Not a long term solution but it will do for me today.

Coffeekup

Barclays overdraft ............1500......50........35

Monzo overdraft ...............1000......50........39

Manchester credit uni..........700.......80........36

Bamboo loans...................3019......52........60

Likely loans ..................6210......295.......40

Aqua card......................2950......80........24

Capital one ...................900.......50........26

It's hard when in debt, at least your getting a grip of the horns and plan ahead, yes it's gonna be a tight 2-3 year's but it's achievable. Took me 7 year's to pay off my debts, if I did something sharp when I first realized the mess I was I could have saved 4 year's of payments.

Grats on the little windfall, your gonna use it wisely good stuff.... It means you serious.
There is the snowball method and the method of paying highest interest first.. when I was paying off my debts I did a mixture of both which kept me motivated.

Looking at the above if it was me I would pay off the car first to free up £200 a month as it frees up so much more to smash down other debt's. If your surplus is still around £200 that gives u £400 to use elsewhere. 
I would then hit the Manchester uni credit freeing up another £80 giving you £480 a month to pay down debts come December. Doing this will give you more manageable debts staring the new year. Yes you'll be paying more interest in the long run but you'll have an asset you can sell of hard times hit and you'll have £280 less to find a month.

I'd then go capital one, Monzo and Barclays overdraft. Freeing up another £150 by the start of summer, or if income look's stable for next 6 months I'd do the bamboo loan first, followed by the C.O. /Monzo Barclays. 

Do note this is what I'd, do only because it frees up more income early on. Others would say highest interest first and I'd agree, but I'd prefer a more manageable debt, than being a couple hundred quid better off in 3 years time.

You don't have nothing in Christmas and birthdays, so between now and then don't buy clothes use that money to get a few gifts if need be.

Best if luck... Stay focused and hit it hard and in a couple of years time you stick all what your paying now into savings, get a mortgage and start the whole debt repaying cycle all over again. Anyhow that's something to look forward to.

KeysMcK

Ok, so I’ve had a small update on this situation. 

I’ve not been able to overpay due to Covid, my earnings aren’t back to where they were. 

BUT I did get a pay out from Vanquis which I used to pay off my Capital One credit card as well as my Monzo overdraft. My thinking was that this would hopefully boost my credit rating and allow me to re-finance some of my higher interest credit moving forwards. 

The good news is, it seems to have worked! I decided to take a leap today and apply for both a loan and a 0% credit card; and have been approved for both! 

I’ve been approved for a £4900 limit on a Virgin Bank credit card, 1% fee and 0% APR for 22 months. Onto this I’ll be transferring my Aqua balance (c2900) and potentially my Barclays (800), although I’m undecided on the latter as I already don’t pay any interest as I pay it off and use it in full monthly anyway. I won’t be able to pay the full balance off in 22 months but can hopefully get another 0% when this is up. 

I’ve also been accepted for a lower (12%) interest loan from Manchester Credit Union. The amount is £5,592.86 and this will be paid over 30 months, replacing my existing (£388 at 36%apr) MCU loan, my Bamboo (£1080 79.9% Apr) and my likely loans (£4125 at 60%apr). Over all it’s reducing my monthly payments on all three from £425 to £215 and is saving me a good chunk in interest. 

So, snowballing might not have happened but I’ve still found myself in a much more manageable situation, and a much stronger foundation to build on. And to think I was considering IVA/Bankruptcy a few months ago! 

I’ll update my SOA soon!

KeysMcK

SOA during Covid, with these new cheaper lines of credit taken into account. (this doesn’t include any commission I might earn) 

Certain payments (Rent, Hello Fresh etc) my partner pays towards, however as these come out of my account I’ve listed them as full figures and added her contribution to my income. 

Other payments (Gas, Electricity etc) come out of my partners account so are not listed. 

 

Statement of Affairs and Personal Balance Sheet

Household Information

Number of adults in household........... 2

Number of cars owned.................... 1

Monthly Income Details

Total monthly income.................... 2340

Monthly Expense Details

Secured/HP loan repayments.............. 212

Rent.................................... 750

Mobile phone............................ 58

Satellite/Cable TV...................... 45

Internet Services....................... 26

Groceries etc. ......................... 100

Clothing................................ 30

Petrol/diesel........................... 50

Road tax................................ 18

Car Insurance........................... 68

Car maintenance (including MOT)......... 30

Other travel............................ 50

Medical (prescriptions, dentist etc).... 9

Pet insurance/vet bills................. 70

Presents (birthday, christmas etc)...... 30

Haircuts................................ 9

Entertainment........................... 50

Hello fresh ............................ 150

Gym .................................... 20

National trust ......................... 10

Total monthly expenses.................. 1785

Secured & HP Debts

Hire Purchase (HP) debt ...... 1550.....(212)......

Total secured & HP debts...... 1550......-.........- 

Unsecured Debts

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

Manchester credit .............5593......215.......12
Barclays Overdraft .............1500......0.......0 (not being charged interest, haven’t for ages, no clue why, daren’t question it.)

Virgin money CC................3000......75........0

Barclay card...................400.......0.........0 (I pay off and use in full each month so not charged interest)

SSL............................1000......10........0

Past due credit ...............80........20........0

Active security ...............260.......10........0

Total unsecured debts..........11533.....330.......-  

Monthly Budget Summary

Total monthly income.................... 2,340

Expenses (including HP & secured debts). 1,785

Available for debt repayments........... 555

Monthly UNsecured debt repayments....... 330

Amount left after debt repayments....... 225

Personal Balance Sheet Summary

Total assets (things you own)........... 0

Total HP & Secured debt................. -1,550

Total Unsecured debt.................... -11,833

Net Assets.............................. -13, 383

DougalDoo

Well done on the steps you are making so far! I’ve noticed you are referring to keeping open credit cards for your file. Whether you choose to fully buy in to this, it’s up to you - I used to believe in doing this to optimise my credit record and I’m sure there is truth to it. However, busting debt for me has been much more a fundamental change in my values and understanding myself as an impulsive person. I never want to be in this position again and want to commit to cash savings wherever possible for things I need. Absolutely not trying to preach, but trust me it feels good to close and cut up a card!!

enthusiasticsaver

I would urge you to cut up the cards too after you clear them with the loan.  Taking the debt consolidation route as you are doing rather than cutting back or snowballing often leads to higher debt in the long run as if spending patterns don't change the debt builds up again on credit cards so before long there is a loan and credit card debt.  I would not transfer the Barclays to the Virgin credit card if it is already 0% unless you cannot clear the £800 by the time the deal expires.  Not much point in paying the BT fee otherwise. I would also urge you to tackle that overdraft before they start charging interest on it because when they do it is likely to be in the region of 40%. 

DayDreamerandGeneralWaster

I have lost count of the number of times l consolidated but didn't clear ther debt. 

KeysMcK

Thanks for the feedback!

Consolidation loan is in, and all other loans now paid off! The lender paid direct to the lenders, must be a credit union thing. 

Virgin credit card now arrived, and the Aqua balance is now transferred over! Another result! I’ve taken on board what’s being said about cutting up cards. Virgin card, Aqua card and capital once card are away in a dark closet, however I am an impulsive sort of guy so I’m thinking chopping them
up may be the best bet. Or maybe freezing them until I have some rainy day money set aside. Deleting the apps too, because it’s so easy to add a card to Apple Pay these days!

The Barclaycard isn’t 0% interest, I just use it for every possible transaction for every month rather than my debit card, I tend to run it up to its limit, but put that much into it too. I think it’s doing me wonders on my credit score to be honest! My worry is if I clear that card with a balance transfer one I’ll just end up spending it back up again. Especially as I’m so used to doing so! 

Ultimately once I’m back to work full time the plan is to start snowballing, and I should start getting commission from work again too it should get easier. 

Thanks for the ongoing support! 

monetxchange

I'd just be careful and make sure you maintain your focus on clearing the debt. Consolidation is always a risk and there's no room to be impulsive and hopeful I'm afraid. There's a lot of "the debt will be sorted if and when" in your future plan so be careful money doesn't start to bleed if these plans don't work out.

The Hello Fresh is insane to be honest. Even with your partner's contribution your income isn't massively high and even assuming £150 gets you the boxes to cover 28 days in a month, that still works out at around £5.50 a day for a dinner ONLY for two. That's huge and you could get so much more for your money by buying the ingredients yourself at the supermarket instead of paying for someone to weigh them out for you.