Retired

Jami74

I'm asking on behalf of someone else.

A gentleman I know owes about £10k. His plan is to work another year of his retirement to pay it off and then he can retire properly.

Are there any other options. Might the credit cards be willing to freeze interest and take lower payments over a number of years? I doubt he'll have much wriggle room with his pension. 

TheAble

Even with interest frozen it doesn't sound great to be humping debt into retirement. I think he has the right idea in working the extra year, getting them paid off and being rid of them.

EssexHebridean

I have to say I agree with TheAble above - it's great that you're trying to come up with ways of helping him though. First thing that stands out to me is that he's talking about selling his property to clear the debt - this is rarely a good idea. if he was at a stage where he actively wanted to move, perhaps to downsize, then perhaps, but it doesn't sound as though that is the way things are. 

Something he could try is contacting the card companies, explaining his situation, and asking if any will reduce the interest rates. He could also take a look and see if he could get any 0% balance transfer offers from other card providers - perhaps point him at the MSE Credit Club for this exercise as it will give him a good idea of where he might be eligible. 0% transfers would significantly speed up the time it might take him to pay back. If nothing like that is available to him then make sure he knows where to prioritise his payments - so getting shot of the card with the highest interest rate first, then "snowballing" the amount he was paying to that card, once it is cleared, to the next highest. It's seemingly obvious to us, but a lot of people simply don't think of it, and spread their payments evenly across everything. 

SusieT

He should be able to reduce them relatively quickly if he sets up standing orders at a bit over the current minimum on the lower interest ones (make sure it is AFTER the normal statement date and before the normap pay by date) and put the remainder to the higher interest cards. Seeing the balances (and interest charged) drop by a big chunk each month will make him feel good about it and help him get through until it is done. If he was paying a bit over £1k a month for the mortgage, he could set the payments so that they are a bit under that so that he has a bit more in his budget to make day to day living a bit easier, and with Christmas approaching it could mean he finds buying any gifts easier without adding to the cards. 
Once the balances start to drop significantly he may even be able to negotiate doing a few less hours or drop a shift each week to gradually get into full retirement.  
When he has paid everything off he will be in a position to decide if he wants to move house, or if he wants to stay where he is and do up the one he is in, but, that may mean worning a few months more to get the money to do the improvements saved first, so it is something to think about later.

EssexHebridean

Great advice on the minimum payments there - and this applies even if the bulk of the available payments are going to a different card. Even when getting a 0% card, I immediately set the monthly payment to a fixed amount just over the current minimum. So if the minimum monthly was £52.75 as a starting point, I might set my monthly payment at £55, for example. This has two advantages - it means that you can budget more efficiently, as you know the precise figure that goes out each month, and you don't end up with the amount being paid dropping over time, leading to "frittering" of odd pounds simply because you weren't aware you had them, and also means that a little more gets chipped off the balance by the end of the 0% deal, leaving less to either clear or transfer on to the next deal. 

Another thing that occurs as a result of Susie's post above - check whether he currently budgets for things like Christmas spending, and if he doesn't, then encourage him to start setting money aside now to cover his spending at at that time. Similarly, for things like insurances - as he is no longer paying his mortgage he should have the ability to set aside money each month ready to pay future premiums annually, assuming he's usually paid monthly until now. Far more cost effective. 

Jami74

Thanks all. He is already paying more than minimum payments.

What would happen if he got unwell and couldn't work? Or if he dies before he's finished paying?

sourcrates

Jami74 said:

Thanks all. He is already paying more than minimum payments and will add the extra £1k a month to the highest interest one. Just under a year and should be clear. He was left to pay the high mortgage after an unfortunate event a few years ago and hadn't planned to get into debt or having to go back to work.

What would happen if he got unwell and couldn't work? Or if he dies before he's finished paying?

If, for example, he couldn`t work, for whatever reason, he just stops paying, its that simple.

Obviously he informs the creditors of his situation, if he has no income, he has no income, nothing much can be done about that, usually accounts are held, written off, or just side-lined, depending on circumstances.

All the debts are what`s termed "non priority debts", his debts would be settled out of his estate, if the value of the estate did not cover all his liabilities, then what`s left would be written off.

Jude57

If the State Pension was his only income, might he be eligible for Pension Credit? It's easy to check on the gov.uk site (beware any site with a similar name) and it's a gateway benefit in that, if you qualify, you can claim other benefits like Council Tax Reduction. It could top up his income if he only gets the basic State Pension of £137.60 per week, up to £177.00 per week for a single person. 

Also worth considering a full financial health check to make sure he's got the best deals on utilities, insurances etc, and is claiming single occupant discount on Council Tax . Putting CTax onto 12 monthly payments rather than 10 could also ease things a bit.

fatbelly

Depends on the individual's circumstances, and you need to do your research and go into it with your eyes open, but equity release is an option that some choose.

https://www.moneysavingexpert.com/mortgages/equity-release/