First timer here - need advice please credit card debt

enthusiasticsaver

crm23 said:

Salaries -
me - 41,000 (take home 2091 with £243 childcare vouchers coming out)
husband - 28,000 (take home £1680)
house value approx £300k
mortgage £235k approx (£914)
tv - £13
All insurances - pet, house, life £130
gas and electric £112
ee - £100 (4 contracts)
NatWest home Loan- £294
sky £57
sofas £60
Car hp inc warranty £240
water £65
ctax £190
credit cards - 
natwest £40 
mbna £232
barclaycard 80
tesco £79
petrol £120 
food £280

my husband also has some low level outgoings that I will need to add once confirmed. 

We are a family of 5 (child benefit received for 2 , eldest is stepson who stays with us 5 days a week but his mum gets the child benefit in place of any maintenance payments either way and its an amicable arrangement with all. Youngest childcare costs are fixed at £250 but currently having to put her in more often at £53 a day (last month was £450..) 

It would be better for you to put it into a proper soa as it does the adding up for you but I have added it up anyway and those outgoings come to £3006 and your income is £3771.  Presumably you also get child benefit for 2 of your children?  In which case there is £765 plus whatever child benefit you receive which is unaccounted for.  Some may  be your husbands outgoings and some may be for things like clothes, birthdays, entertainment etc as you have not allowed for those.  Regardless of that I am guessing that the debt has arisen due to years of overspending and in spite of balance transferring if you only pay minimums the debt will never be paid off. Now you have got to the point where the debt is so high you cannot get any deals and you are seriously overcommitted.  Unfortunately there is no quick silver bullet way of getting out of this and you will need to focus on really paying it off and cutting back as far as possible. Although you have said you live frugally you have a fairly expensive car at £240 and as there is more than £765 astray in your soa I think you spend more than you think you do. 

The reason you are paying a lot in interest and repayments is because you have a large amount of unsecured debt and balance transferring perpetually does not pay the debt off if you still only pay minimums. Credit cards count on you doing this as it traps you in a perpetual cycle of debt and eventually you end up paying high rates when you can no longer get 0% deals.  As you have almost £43k of unsecured debt plus your HP on the car and sofas I would think you must be near that point now especially as you have a fairly high mortgage too. Your options really are only to cut back and focus on repaying the debt now rather than just minimums.  A DMP will not help you as your income shows repayments are sustainable.  Your problem is too much debt and bad budgeting. If you sort out the budgeting the debt will start to reduce and eventually things will get better.  

You have not put the interest rates but I suggest you cut up the cards and stop using them altogether and focus on maybe the smallest first which is the Nat West.  You also need to start saving for emergencies and planning for expenditure like birthdays and car costs etc.  I would look to change the car for something cheaper as soon as possible and cancel sky and look for better value insurances.  The phones should be moved to sim only asap.  You also need to move out of this mentality of borrowing whether on loans or credit cards.  Only then will things improve. 

crm23

Hi, thank you all so much for the advice so far. I am still in the process of getting all the financial statement together, but I spoke to a company earlier (National Debt Service) who said they don’t charge fees etc. They did a credit search and the figures across me and my husband are very high. We have roughly £52k
worth of unsecured debt. All credit cards and 2 loans. Between us we are paying over £1k a month back on these. They have recommended an IVA, which, if accepted they said would be a monthly repayment of roughly
£395 for all of the above debt for 5 years and then wiped. I know this will have an effect on our credit rating but neither of us want credit again as it ruins you and on paper we earn good wages so this should really put us in a position to save again . The man said it would
have no effect on our mortgage (1 year into our term of 5 years) am I missing something or do you think this is the best option? 

To give you a bit more history from my first post. We were doing ok, we then moved house and had another baby all within 2 years. I returned to work full time and my husband was then offered his ‘dream Job’ we thought we could take the £9k hit on his salary (he hated the role he was in and this was a complete career change in something he loves) but in hindsight we couldn’t afford it. Then add coronavirus in where we couldn’t rely on family for childcare and we’re consistently putting £400+ a month in childcare fees alone on cards just to continue working. 

I don’t want to rush into this, but I can’t see another option where we’ll ever be in a position to actually save again. Thanks again. 

kimwp

It's really difficult to advise when you haven't filled in a proper SOA and accounted for all your spend. It could tell us that you have enough margin to tackle this by yourself (and while you don't want credit again, why cut it off unless you need to). 

ElizabethRose

Your water seems very high. I'm not on a meter and even mine isn't that high. It might be worth looking at a meter.

I'd suggest completing a full SOA on here as you'll get a lot of very helpful suggestions. I'm not sure an IVA is the right route for you as you've probably got options. Whilst you say you don't want credit in the future you need a good credit report for the best rates when remortgaging. 

sourcrates

National debt service are a lead generator for an IVA company, basically they sell IVA`s, so by asking advice from a company that sells IVA`s, you can pretty much guarentee they are going to recommend an IVA !!!!

You are new to this, and that`s ok, but please do not take advice from the first company that comes up on Google.

Debt mangement companies pay to be at the top of the list, yes all IVA`s attract fee`s, but debt advice should be sought from either National Debtline, who are a Government backed free advice service, stepchange debt charity, or payplan debt charity, all offer free and impartial advice on your situation.

An IVA may not be right for you, as all IVA`s have a remortgage clause, where in year 5 you must remortgage your house, now if you have a lot of equity, you could end up paying far too much, don`t do anything without first posting an up to date SOA.

Your IVA payment would be based on your disposable income, so what you were paying towards your debts, plus whats left unacounted for in your budget, you have £800 odd quid missing from your SOA, plus £1000 you pay towards your debts currently, your payment is likley to be quite high, around £1800 per month as things stand.

Obviously that would be lower if your budget changes, but an IVA is not recomended if you have quite a high volume of disposable income.

crm23

Thanks for this. I’ll post SOA tonight. We are spending pretty much what we earn at the minute, so don’t think we’d have any ‘disposable income’ as such. We were told roughly when we went through the figures with the company that the repayment would be around £395 a month and certainly not any more.
i completely agree we need to look into this more though, i‘m waiting on a call back from
payplan thank you! I didn’t know the bit about re-mortgaging at the end of the term. Can you explain a bit more about that please? At that point can they ask for more money from you? There’s roughly 65k equity in the house at the minute. 

crm23

I’ve just messaged the original company I’ve spoken to and they’ve said I wouldn’t have to remortgage at the end of the term as I haven’t got the equity to do that? What would be the aim of a ‘forced re-mortgage’ as such? 

kimwp

sourcrates said:

National debt service are a lead generator for an IVA company, basically they sell IVA`s

You are new to this, and that`s ok, but please do not take advice from the first company that comes up on Google.

Debt mangement companies pay to be at the top of the list, yes all IVA`s attract fee`s, but debt advice should be sought from either National Debtline, who are a Government backed free advice service, stepchange debt charity, or payplan debt charity, all offer free and impartial advice on your situation.

It sounds like there might be some wires crossed as OP says they said they wouldn't charge any fees. It might simply be that they take a percentage cut and call it something other than a fee though! 

fatbelly

kimwp said:

It sounds like there might be some wires crossed as OP says they said they wouldn't charge any fees. It might simply be that they take a percentage cut and call it something other than a fee though! 

They're a lead generator, probably for creditfix or whoever is paying the most at any time. The IP pays them, then sets up an IVA with the usual fees built in.

sourcrates

kimwp said:

sourcrates said:

National debt service are a lead generator for an IVA company, basically they sell IVA`s

You are new to this, and that`s ok, but please do not take advice from the first company that comes up on Google.

Debt mangement companies pay to be at the top of the list, yes all IVA`s attract fee`s, but debt advice should be sought from either National Debtline, who are a Government backed free advice service, stepchange debt charity, or payplan debt charity, all offer free and impartial advice on your situation.

It sounds like there might be some wires crossed as OP says they said they wouldn't charge any fees. It might simply be that they take a percentage cut and call it something other than a fee though! 

No, no wires are crossed, allow me to explain the process to you as i am particulaly familiar with it.

An IVA works like this, you make 60 monthly payments, over 5 years, the money accrues in a pot, IP`s do not work for nothing, like i said, fee`s are charged on the arrangement, VAT, interest, other sundry charges, all fee`s and other charges come out of that pot, also at specific times, the IP will make payments to your creditors as well, from the same pot, that is a basic guide to how an IVA works.

In year 5, and this clause is written into most every IVA, you will be expected to release equity from your home, if you have 65k equity now, chances are it will be more in 5 years time, if for any reason you cannot do that, you are expected to make another 12 months of repayments, or, a new kid on the block, is one of their "prefered partners" offers you a loan to pay off the IVA, and you then repay them, interest rate unkown.

You must remember that what you now pay to your debts, will become disposable income once you enter an IVA, so all that will count towards your monthly repayment, don`t be fooled by sales spiel from these people, i`ve had an IVA, i know the process very well, we get countless posts from those who have signed up to these arrangements, totally oblivious to what they are agreeing to, then coming on here a few months later absolutly distraught because their payments have gone up, and their IP won`t listen to them.

IVA`s do have there place, but its exteamely important to get a proper budget worked out first, and then to gain as much information about your options as possible.