Getting to grips

EssexHebridean

Try to mind-shift towards working in a plan of clearing things without borrowing - and learning to budget as you go along too. The problem with any form of borrowing (even from family) to clear debt is that it is bluntly a way of short-cutting the process and making it easier, and that in turn means you are far more likely to dig the same holes for yourself again in the future. Your disposable income currently, along with some savings you can make in the areas of electricity and groceries, for example, means that you are very able to pay things down while also building an emergency fund for the “unforeseen” stuff, but the advantage of also learning to work to a robust budget is that less stuff IS unforeseen because you’ve budgeted, and saved for things like Christmas spending, replacement clothing etc. The emergency fund deals with something like the TV or another appliance owned by you needing replacing unexpectedly. Absolutely do NOT borrow money to give yourself a cash buffer though - for a start, without a budget in place, how long do you think that buffer would really last? 

You’ve got an absolute gift at the moment with a year where the rent money can be used to make a huge impact on what you owe, it would be a shame to squander that gift and put yourself in a worse position in 12 months than you are in right now. 

capuchin

Is shifting debt onto other 0% cards not essentially doing the same thing though [as shifting debt into family borrowing]? The ultimate goal being to bring down the total debt, and the initial one to bring down the rate of interest so my repayments are paying off debt not servicing the interest on them.

I've just calculated there's no rent to pay for at least 2 years. (The reason I got into this issue was going from 5k/month to 600 a month income and not handling it.) A few years ago I simply stopped the depression spending though, so there's a lot of elasticity in my current budget. I'm looking at that original SOA and updating below for accuracy.

Started another SOA but pressed reset by mistake:

Essentially outgoings are the same, add 100/month for emergencies and 10 a month for home insurance. Debt is actually a little down in real terms (I was using figures from a credit agency before and have checked the actual accounts now)

The biggest card issues are as follows:

Overdraft - 39.49% (1700) ------ This is HUGE and needs solved immediately. I'm just going to let income go in for a few months with spending the absolute minimum to let that self resolve if you advise against borrowing funds to resolve it. No wonder they agreed to raise it to 3k limit with that stupid interest rate.

AMEX - 27.1% (1100)

MBNA - 20.9% (2920)

Paypal - 19.9% (1710)

The rest are 0% - 9.9%.

- If I was going to take a 5k loan from my sister (if that's advisable) I'd use it to immediately pay the overdraft and MBNA, then shift paypal and AMEX onto a virgin/post office/natwest balance transfer card. Worth noting my current natwest card is at 8.9% too and has plenty of 'available credit' on it, so perhaps that's an option soon. ,

The upside to this is protecting my credit rating and paying off around half the total debt this year. The downside is it's significant outgoings.

EssexHebridean

The reason we advise against a family loan is that there is far less issues for many folk around defaulting on that, and ultimately, risking destroying your relationship with a family member who cares for you enough that they are happy to lend you a large sum of money is way more significant than anything you can do to your credit file. Think about it this way, if you stop paying her, and tell her you can't afford it one month, she's not going to send you nasty letters, call you up and hassle you over the phone, or make threats, is she now. And regardless of your good intentions about payment, deep down you know that, so the chances of defaulting are way higher.  You need to do the legwork, and put in the effort to clear things, clearly you're not disputing that you've run up the debt (and I and most others on here would applaud you for that) even though some of the spending sounds as though  it was mental health related. That putting in the work - and it IS hard work, yes - but that is precisely what will stop you in the future when you're considering putting a purchase you want, but don't need, onto an interest bearing credit card. 

Yes to tackling the OD first absolutely, for all the reasons given. While you're dealing with that pay minimums to everything else. The first month that you reach the end of the month and can see a surplus, you transfer all bar 10% of that surplus to the AMEX card I would suggest - the 10% goes to your emergency fund. Continue until that is cleared, then switch the original payment from AMEX PLUS the surplus to MBNA, continue to clear that, and so on.  In the meantime sign up to the MSE credit club and see what your 0% balance transfer options are - if you can get anything fee free so much the better. If nothing available there or you exhaust options then shift what you can onto your Natwest card as you've already identified so long as it will accept balance transfers at the same rate. 

For an emergency fund, I'd initially aim for £500 allowing for your circumstances. Once the debt is cleared you can continue building that obviously. 

Keep a note of all the expiry dates for the 0% cards and make sure you switch when the time is nearly up. 

Close cards down as they are paid off - particularly the higher interest rate ones. This will also help to look after your credit history as it will lower your total available credit.

You can do this, and you can, from what you have said, do this yourself, without going down the road of trying to borrow your way out of debt.

mcpitman

Hi, quick thoughts..............

Sell the silver (nice find btw), and put that money in a savings account to avoid having to use credit should any of life's mishaps appear.

Not sure why you would borrow from your sister, as you may be able to get those debts under control over the next year.

Would be helpful to refresh your SOA with the interest rates of your cards so we can look at the best order to pay them off, but essentially the £500 you would have paid your sister with, throw at the debts. I would pay the overdraft off first, then remove or reduce the facility.

As a further aside, I wouldn't trash your credit worthiness by defaulting. It's a long 6 years with multiple defaults on your history....

TheAble

Agree with EH - I definitely wouldn't borrow from your sister, it's just not fair on her. Keep money and relationships separate. The only exception I'd make is if you were in desperate need of money quickly owing to some short term cash flow problems but you could repay the money quickly - 6 months at the absolute most. But that isn't the circumstance here - you'd just be borrowing to save on interest.

capuchin

Thanks all!

It definitely was MH related @EssexHebridean , but still ... I racked up the debt, it would be dishonourable to just turn around and not pay anything back. I do resent that there's no mechanism to claim back the interest and stuff in these situations (that I know of at least?) because it does seem somewhat exploitative. But it is what it is.

Would a 6 month loan of £2000 or so to clear the overdraft be considered too aggressive? (or even a money transfer card?) - Unless I can find a quick way to get rid of 2x 1kg silver coins @ £750 each... that'd be preferable if so. I could ask around. Perhaps ebay could work.

I do actually agree with all of you that it wouldn't be particularly fair on my sister, even though she can easily afford it!

Thanks for all the help and encouragement all, I should probably start a blog and actually get cracking with it. It feels eminently more doable when you analyse it properly.

@poppy811 You posted in the wrong thread I assume?

capuchin

Hello,

I just wanted to thank all of you for the help in this thread two years ago. It really gave me the kick up the behind that was required. 

Fast forward, and I have under £3000 debt remaining. (of £16,000~) I've paid next to no interest, and really feel better for it. I have used some relatively creative methods (hello curve metal), but mainly it's been a case of being disciplined and spending on debt, not on myself. I'd paid everything without defaulting or going to an arrangement.

My emergency fund + cash stands at £2000, and I'm actually considering an AMEX platinum, under two years after I shut down the amex. That's bonkers.

It's easy to sleepwalk into a lot of debt, but it takes some hard work to get out of it. Once I'm done, I've promised myself a nice painting, so I really need to be done. A holiday would be nice too.

Debtfreeforever

Wow that is amazing @capuchin great results, really well done! How does it feel? Not long to go now until the full debt is gone. Based on your trajectory it's another 3 months? 

RAS

Well done. 

It's up to you but maybe put a tenner a month in a painting/holiday budget even now? Might delay your debt clearing NG by a month but gets you into the habit now, and you just switch the debt payment to savings when you are clear of debt.

capuchin

Debtfreeforever said:

Wow that is amazing @capuchin great results, really well done! How does it feel? Not long to go now until the full debt is gone. Based on your trajectory it's another 3 months? 

Thank you! Aim is to pay off £2000 in 5 months when my natwest regular saver matures, and then the last £1000 can just run at minimum payments for however long as its inconsequential. 

Honestly feels amazing. The most difficult part right now is not to simply pay it off by sinking my cash reserves into it. I'm at the point where I just want it gone, but it's not logical to get rid of it with cash that can earn interest. 

RAS said:

Well done. 

It's up to you but maybe put a tenner a month in a painting/holiday budget even now? Might delay your debt clearing NG by a month but gets you into the habit now, and you just switch the debt payment to savings when you are clear of debt.

Many thanks. I'm currently paying £150 into a regular saver and £150 into an S&S ISA as well as doing some of the bank switching and topcashback tricks and putting it into monzo pots and putting any £1 or below into a jar. My 'savings' currently are mostly for paying the debt, (ie. are earmarked not as savings but as debt payments) but I'm tempted to open the First Direct regular saver at 300/month once the debt is gone. I'm a little wary of it currently as you can't withdraw until maturity and I'd rather stay nimble, but it'd go someway to the painting.

As for the holiday, I've got a little 'extra' saved up from bank switching shenanigans and stuff (opening the S&S ISA got me £320 and I can do it again in April), so I'll probably just be able to afford that. IG have also found an old account of mine, which I think has some money in, so should help a little.