Advice on Debt

good_credit

Hi Guys,

My SOA is below. I am thinking of taking a secured loan against my property of £30.000 to clear most of my debt. The reason for the loan is because
alot of my cards are coming to an end on 0% and they payments will go unpaid. I understand the risk of falling back into debt, however i intend to close all my credit card accounts to resist any temptation of spending on them. Any help/advice would be much appreciated.

[font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]

Household Information[/b]

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

Number of children in household......... 1

Number of cars owned.................... 0[b]

Monthly Income Details[/b]

Monthly income after tax................ 1570

Partners monthly income after tax....... 600

Benefits................................ 82

Other income............................ 0[b]

Total monthly income.................... 2252[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 393

Secured/HP loan repayments.............. 0

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

Management charge (leasehold property).. 0

Council tax............................. 137

Electricity............................. 41

Gas..................................... 41

Oil..................................... 15

Water rates............................. 38

Telephone (land line)................... 17

Mobile phone............................ 30

TV Licence.............................. 10

Satellite/Cable TV...................... 50

Internet Services....................... 41

Groceries etc. ......................... 300

Clothing................................ 0

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

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

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

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

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

Other travel............................ 60

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

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

Medical (prescriptions, dentist etc).... 20

Pet insurance/vet bills................. 0

Buildings insurance..................... 0

Contents insurance...................... 20

Life assurance ......................... 20

Other insurance......................... 0

Presents (birthday, christmas etc)...... 0

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

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

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

Emergency fund.......................... 0[b]

Total monthly expenses.................. 1283[/b]

[b]

Assets[/b]

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

House value (Gross)..................... 0

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

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

Other assets............................ 0[b]

Total Assets............................ 0[/b]

[b]

Secured & HP Debts[/b]

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

Mortgage...................... 144000...(393)......0[b]

Total secured & HP debts...... 144000....-.........-   [/b]

[b]Unsecured Debts[/b]

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

Credit Card....................2380......50........25.55

Credit Card....................2904......80........18

Credit Card....................696.......25........6.9

Credit Card....................4500......80........26

Credit Card....................680.......10........0

Credit Card....................1600......36........25.55

Credit Card....................2400......80........26

Credit Card....................6953......170.......18

Credit Card....................7288......160.......18

Credit Card....................4888......78........26.93

Credit Card....................3321......56........8.93

Credit Card....................4897......80........26.93[b]

Total unsecured debts..........42507.....905.......-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 2,252

Expenses (including HP & secured debts). 1,283

Available for debt repayments........... 969

Monthly UNsecured debt repayments....... 905[b]

Amount left after debt repayments....... 64[/b]

[b]Personal Balance Sheet Summary[/b]

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

Total HP & Secured debt................. -144,000

Total Unsecured debt.................... -42,507[b]

Net Assets.............................. -186,507[/b]

[i]Created using the SOA calculator at www.stoozing.com. 

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

andys15

How much equity have you got in the house. You will probably be advised against taking a secured loan. If it works for you then go for it, but it is easy to clear debts and then start to spend more. You will think you have an extra few hundred a month so you end up taking on more debt. OR you decide you can afford to pay for a holiday on your credit card for instance. You need to be disciplined and never get into debt again and look out for the traps. 

Could you not get an unsecured loan with the high street banks?  

LottyWatty

Well done on taking the first steps to tackling your debt, it’s not easy at all so well done. 

My gut reaction is not to transfer unsecured debt onto being secured against your home - however I do not know much about this. I’m only talking from personal experience of debt consolidation not being the answer because it doesn’t tackle the issue at hand and you are taking a gamble that this will be the time you really do cut up the credit cards and never accrue another debt in your life. When in reality, it rarely happens and for one reason or another the debt starts to build up again. 

But, like I say, I am only talking from personal experience. There are lots of people on this forum who are very knowledgeable and will be able to give you very good advice so you are in the right place. 

Very best wishes whatever your decision is

Sky_

If you ever struggle to pay your mortgage (life does happen unfortunately), it will be easier to find £393 than to find £393+£xx of consolidated amount costs.  By securing the debts against your house, you're increasing the chance of losing your house if finances ever get really difficult, so I just wouldn't do it.

Naomim

You will always be advised to not secure debt against your home.   

It looks like your SOA is fairly tight, with maybe only small savings that can be made against the TV subscription can you get a better deal with your TV, internet & landline all in one? Do you need a landline? Or cancel it and go to just a streaming service such as Nettlfix?  Also,  possibly mobiles - if you are already on SIM only can you switch providers to a better deal? If in contract, when are the contracts due to expire?   You're already missing a few categories, haircuts, clothing and emergency fund.   Is there anyway you or your partner can up your incomes? 2nd jobs at all?

Naomim

One-step-at-a-time

Chances are that a consolidation loan may not be an option with those figures, or if it is, the APR you are offered may be very high (we tried to remortgage a few years ago on not dissimilar figures but were turned down flat, and credit was a bit easier to get then). You may have a bit of wiggle room in the SOA - it's tight, but not currently impossible. As Naomim says you are missing a few categories which need to be fulled in for accuracy, also are all of those payments exact or are any rounded up/down/guesstimated? I would look very closely at TV/internet/streaming, ditch cable entirely (do you really need that and all the streaming services?). 
Have you tried plugging all of your card payments and APRs into a snowball calculator? 
Also if there's no possibility for extra work, do you have anything that you could sell to start the ball rolling?

good_credit

Thank you for all the replies.

 To answer some of the questions asked. My flat is worth 400K current market value and I have 144K outstanding mortgage. Could not get unsecured loan or further lending from mortgage company.

All figures are accurate. I cut my own hair! My wife insists on a landline for emergencies. I am trying to cutback where I can.

 I got my SIA license recently, however not had any luck finding weekend security work so far. 

I got one offer on the loan via lendle 4.312% fixed for 5 years then the variable rate which is currently 5.112% with optimum finance who made the offer. If the rates stayed the same over the course of the 11 year agreement I would pay £42500.96. I know interest rates can increase , however I intend to pay the loan off within 7 years with overpayments.
 

BabyStepper

Secured loans are generally a bad idea. It wouldn't pay off your debt, it would just shift the debt to another lender and that's the trouble, believing your debt problems can be solved with one quick loan application. Your debt is a symptom of not budgeting and living within your means. We have ALL been there and these boards are full of people who have either learned or are trying to learn how to do that. I appreciate you're looking for an answer, and there definitely is one so do not panic, but a secured loan is not it.

There are too many sections missing from your budget, clothes, building insurance, gifts, emergency fund. Once they're added in I'm guessing your basic monthly expenses for a family of 3 are around £1,600-£1,700. Add on the debt repayments and you're not solvent - it looks like you're using cards to fund day-to-day living. 

You need to redo your budget to something more realistic. Go over bank statements, credit card statements and figure out exactly what you spend. Then you need to get solvent. As mentioned by previous posters, more work, sell some stuff, anything you can do to increase your income. 

If that can't happen then I'd say a debt management plan would work for you. Have a search around the boards, get some info, phone Stepchange, learn all about it. 

Then come back and tell us how you're getting on. Best of luck.

andys15

If I was in that situation, on your income, I would probably look at selling up. You have great equity in your flat. I don’t know what area you are in, but could you sell up, pay off you debt and possibly move area to buy a house or flat in cash, thus having no mortgage and no debt. 

fatbelly

At 42k non-priority debt over 12 cards, with maybe £900 available to service that, I'd be talking to stepchange about a debt management plan. That should kill the interest and get you debt-free in about 4 years. 

Payplan is an alternative. I personally prefer them.

Far less dangerous than a secured loan, and more flexible and cheaper.

Jude57

Once again can I just point out that your SOA has many gaps, which make it look as though you can afford your contractual payments on your unsecured debts. On this basis, StepChange are unlikely to offer a DMP. I'd suggest you look through your spending over, say, the last 6 months to see where your money is going, review whether you're on the best deals for utilities and insurances and then adjust your SOA to reflect the actual situation, rather than what you hope it will be. Once you've done that, it's very likely a DMP would be a good option for you and although it would mean your family living on a strict budget for a few years, you could be totally debt free at the end of it.