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Advice please
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napnap
Posts: 2 Newbie
To cut a long story short, I seem to have got myself into a bit of a pickle. My dad died suddenly last year, which meant unplanned time off work (no pay) and trying to help my mum out until she was able to sort her finances out. I've ended up at a point where my monthly payments are just about affordable based on my current income but any unplanned expenditure can push things over into using credit. I'm at about 75% utilisation of my credit limit and my credit score shows as 'fair'. With the interest rates on the credit cards and the amount I'm able to pay off I'm worried that things will creep out of control (minimum payments on each card are rising each month).
Given the available equity in my property, I was considering taking a mortgage extension from the bank I hold the mortgage with to cover the debt I have elsewhere (they offered £100pm for £16500 over the 20yr term of my mortgage which I would easily have been able to afford and make overpayments towards when possible) but they told me that due to my credit score they could not lend to me.
Given that I'm still just about managing to cover my payments, I don't feel that a DMP is the best way forward? Does anyone have any advice to offer? I'm aware my situation isn't too bad at the moment but I really don't want to just stick my head in the sand as I know it'll get worse unless I do something.
Given the available equity in my property, I was considering taking a mortgage extension from the bank I hold the mortgage with to cover the debt I have elsewhere (they offered £100pm for £16500 over the 20yr term of my mortgage which I would easily have been able to afford and make overpayments towards when possible) but they told me that due to my credit score they could not lend to me.
Given that I'm still just about managing to cover my payments, I don't feel that a DMP is the best way forward? Does anyone have any advice to offer? I'm aware my situation isn't too bad at the moment but I really don't want to just stick my head in the sand as I know it'll get worse unless I do something.
[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......... 0
Number of cars owned.................... 1[b]
Monthly Income Details[/b]
Monthly income after tax................ 1700
Partners monthly income after tax....... 500
Benefits................................ 0
Other income............................ 0[b]
Total monthly income.................... 2400[/b][b]
Monthly Expense Details[/b]
Mortgage................................ 441
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 117
Electricity............................. 45
Gas..................................... 25
Oil..................................... 0
Water rates............................. 35
Telephone (land line)................... 0
Mobile phone............................ 30
TV Licence.............................. 0
Satellite/Cable TV...................... 0
Internet Services....................... 36
Groceries etc. ......................... 400
Clothing................................ 20
Petrol/diesel........................... 40
Road tax................................ 0
Car Insurance........................... 50
Car maintenance (including MOT)......... 10
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 20
Pet insurance/vet bills................. 0
Buildings insurance..................... 17
Contents insurance...................... 0
Life assurance ......................... 15
Other insurance......................... 0
Presents (birthday, christmas etc)...... 20
Haircuts................................ 15
Entertainment........................... 20
Holiday................................. 0
Emergency fund.......................... 20
Car lease............................... 190[b]
Total monthly expenses.................. 1566[/b]
[b]
Assets[/b]
Cash.................................... 0
House value (Gross)..................... 265000
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 0[b]
Total Assets............................ 265000[/b]
[b]
Secured & HP Debts[/b]
Description....................Debt......Monthly...APR
Mortgage...................... 125000...(441)......0[b]
Total secured & HP debts...... 125000....-.........- [/b]
[b]Unsecured Debts[/b]
Description....................Debt......Monthly...APR
Credit card 1..................6400......150.......0
Credit card 2..................4000......120.......0
Personal loan..................4500......220.......0
Overdraft......................1500......0.........0[b]
Total unsecured debts..........16400.....490.......- [/b]
[b]
Monthly Budget Summary[/b]
Total monthly income.................... 2,400
Expenses (including HP & secured debts). 1,566
Available for debt repayments........... 834
Monthly UNsecured debt repayments....... 490[b]
Amount left after debt repayments....... 144[/b]
[b]Personal Balance Sheet Summary[/b]
Total assets (things you own)........... 265,000
Total HP & Secured debt................. -125,000
Total Unsecured debt.................... -16,400[b]
Net Assets.............................. 123,600[/b]
[i]Created using the SOA calculator at www.LemonFool.co.uk.
Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]
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Comments
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You've made a good start to your SOA and figuring this situation out. The advice is almost always not to transfer unsecured debt to your mortgage as this could mean you lose your home, so it's to your advantage that your bank said no to that.
Your SOA doesn't quite add up- it says you have £834 for debt repayments but only £144 remaining after paying £490 in debt repayments. Regardless, the key is to make sure that the figures in your SOA represent reality rather than your ideal or a guess.
If they are correct, you could cut back significantly on food spend and throw an additional £200+ at the debt each month. Other costs seem reasonable if they are accurate, it really then becomes what you are willing to go without for a while to drive the debt down.
Once you've worked out what you can throw at the debt, the financially sensible approach is to identify the debt with the highest interest rate and only overpay on that one, paying the minimums on the other debts.Statement of Affairs (SOA) link: https://www.lemonfool.co.uk/financecalculators/soa.phpFor free, non-judgemental debt advice, try: Stepchange or National Debtline. Beware fee charging companies with similar names.0 -
The £144 is correct as for some reason the income figure is showing as £2400 when it should be £2200 leaving a disposable income of £634 and remaining £144 after the £490 debt repayments.
If you really do have a £144 surplus then that would indicate you are managing ok but I guess you do not have money left at the end of the month so you need to find out where that missing money goes. You also need to put the interest rates on that soa. Why is your partner only earning £500 or is that their contribution to the household expenses and their income is kept separate? The groceries figure is huge for just 2 of you so that would be easy to reduce that. You definitely should not add it to your mortgage. Did you have debt before your dad died or has this just happened since your reduced income?
Whether or not you go down the DMP route depends on how disciplined you can be and the interest rates you are paying. If the rates are very high and the debt is not coming down then asking them to freeze the interest will impact on your credit record which presumably is not great anyway. That is the biggest disadvantage of a DMP in that you will need to default and your credit record will be disadvantaged for 6 years. I personally think you should reduce the groceries spend and throw as much at the debt as possible starting with the overdraft. Stopping using this and the cards is essential though.I’m a Forum Ambassador and I support the Forum Team on the Debt free Wannabe, Budgeting and Banking and Savings and Investment boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.
The 365 Day 1p Challenge 2025 #1 £667.95/£162.90
Save £12k in 2025 #1 £12000/£70000 -
For me the car lease is also a massive drain on your income. I'm guessing it also came with a large upfront payment, which will need to be saved if you are considering another lease at the end of this one?
You mention £10/month is going to servicing, but you have no cash so where is this now? New car servicing tends to be higher that £120/year. That on top of insurance at £600 makes this an extremely expensive way to get around.
£40/month on fuel suggests you aren't doing very high mileage either?0 -
Sorry to hear you've had a rough time, I'm glad you've been able to support your Mum but sadly it's come with some impact for you over and above the usual grief hasn't it.napnap said:[font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]Household Information[/b]Number of adults in household........... 2Number of children in household......... 0Number of cars owned.................... 1[b]Monthly Income Details[/b]Monthly income after tax................ 1700Partners monthly income after tax....... 500Benefits................................ 0Other income............................ 0[b]Total monthly income.................... 2400[/b][b] Actually £2200Monthly Expense Details[/b]Mortgage................................ 441Secured/HP loan repayments.............. 0Rent.................................... 0Management charge (leasehold property).. 0Council tax............................. 117Electricity............................. 45 Unusual for a household with gas heating which I presume you have to see an electricity bill higher than the gas?Gas..................................... 25Oil..................................... 0Water rates............................. 35 have you checked if this could be reduced with a meter? if already metered, with just two adults you may be able to reduce that costTelephone (land line)................... 0Mobile phone............................ 30 If this is just one phone look for a SIM only deal when out of contractTV Licence.............................. 0Satellite/Cable TV...................... 0Internet Services....................... 36 This is quite pricey - if you're near to the end of contract you may be able to get the Vodafone deal that's around at the moment for about £20 a monthGroceries etc. ......................... 400 That's a LOT for two people! We spend in the region of half that at the most, and as we aren't in debt we're not massively frugal with food either. You definitely need to think about reducing this.Clothing................................ 20Petrol/diesel........................... 40Road tax................................ 0Car Insurance........................... 50 assume you've shopped about and this is the best price it can be?Car maintenance (including MOT)......... 10 Are you actually saving this up and is it really enough? I assume servicing is covered under a lease agreement, so is this just to cover tyres, consumables etc?Car parking............................. 0Other travel............................ 0Childcare/nursery....................... 0Other child related expenses............ 0Medical (prescriptions, dentist etc).... 20 Could this be reduced with a prescription pre-payment card?Pet insurance/vet bills................. 0Buildings insurance..................... 17 This covers contents too I hope?Contents insurance...................... 0Life assurance ......................... 15Other insurance......................... 0Presents (birthday, christmas etc)...... 20Are you actually saving this - you're not showing any cash assets...Haircuts................................ 15Entertainment........................... 20 This is quite low - have you checked that it covers what you really spend?Holiday................................. 0Emergency fund.......................... 20Are you actually saving this - you're not showing any cash assets...Car lease............................... 190[b]Total monthly expenses.................. 1566[/b][b]Assets[/b]Cash.................................... 0House value (Gross)..................... 265000Shares and bonds........................ 0Car(s).................................. 0Other assets............................ 0[b]Total Assets............................ 265000[/b][b]Secured & HP Debts[/b]Description....................Debt......Monthly...APRMortgage...................... 125000...(441)......0[b]Total secured & HP debts...... 125000....-.........- [/b][b]Unsecured Debts[/b]Description....................Debt......Monthly...APRCredit card 1..................6400......150.......0 Are the cards really on 0% If so when do the deals finishCredit card 2..................4000......120.......0Personal loan..................4500......220.......0 Now this really isn't 0%, is it!Overdraft......................1500......0.........0 You need to make this the first focus to get rid of[b]Total unsecured debts..........16400.....490.......- [/b][b]Monthly Budget Summary[/b]Total monthly income.................... 2,400Expenses (including HP & secured debts). 1,566Available for debt repayments........... 834Monthly UNsecured debt repayments....... 490[b]Amount left after debt repayments....... 144[/b][b]Personal Balance Sheet Summary[/b]Total assets (things you own)........... 265,000Total HP & Secured debt................. -125,000Total Unsecured debt.................... -16,400[b]Net Assets.............................. 123,600[/b][i]Created using the SOA calculator at www.LemonFool.co.uk.Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]
Some comments above in bold...
The reason I've stressed that you need to get the overdraft gone is that OD's are a really nasty sort of debt because they can literally be called in at any time - it will also undoubtedly be costing you money of course, so that's another reason to get it tackled.
You need to really nail down your budget - a spending diary may help to track down the surplus that is currently going missing - and with that tracked down you clearly do have enough to meet outgoings so will be able to step away from using credit. it's vital that you DO stop using credit as you've already identified. it's also vital that you don't put this debt onto a mortgage - although some of the current debt relates to your unpaid time off (necessary - sometimes these things just have to be done) I'm guessing that some also relates to a degree of frittering. If you put the debt to the mortgage, and the frittering continues, but with a higher mortgage payment as well, then before you know where you are there will be another 16k of debt and this time you really won't - even on paper - be able to meet the payments. Turning unsecured debt into the sort where if the wheels come off the roof over your head will be taken is really not a good plan.
The question of the car has already been addressed but I too am questioning whether this is really a good use of funds. Is it the sort of deal where there will be a balloon payment to come up with at the end of the term? If so how do you plan to finance that? It's costing you a lot of money each month at the moment - is it definitely a necessity allowing for the low mileage?🎉 MORTGAGE FREE (First time!) 30/09/2016 🎉 And now we go again…New mortgage taken 01/09/23 🏡
Balance as at 01/09/23 = £115,000.00 Balance as at 31/12/23 = £112,000.00
Balance as at 31/08/24 = £105,400.00 Balance as at 31/12/24 = £102,500.00
£100k barrier broken 1/4/25SOA CALCULATOR (for DFW newbies): SOA Calculatorshe/her1 -
EH has picked up on the two points I'd spotted, but it's worth emphasising:
1) Overdrafts are a horrific debt, though less scary than they were before 2019. Where before you had multiple stacking fees and interest, now you just have interest at rates that would make a payday lender blush. On £1200 OD, you're potentially losing £40/month in interest*
2) Nobody with £144 per month surplus has debt. That money is leaking away somewhere, and before you can plug the leak you have to find it. You may already know where it is - you wouldn't be the first poster to hide a particular expense category - but if you don't, then you owe it to yourself to repeat the exercise the long and hard way. That is, take the last 6 months worth of bank and credit card statements**, index and categorise every spend on there, add together each category, and divide by the number of months. Then you'll see the leak. Then you can make a realistic plan.
* I assumed 50% APR
** Or just connect all your accounts to an app like Emma or Yolt and let it cook for a while.1 -
Good points from SPL - I'll add one thing to no 2) and that is to do it the manual way - you've really not got time to let an app help you find what's going on I'm afraid - plus you need to actually do the groundwork here so you fully understand your own budget. Apps can be great, but ONLY once you've learned how things really work step-by-step - otherwise however would you spot if the app has an error further down the line.🎉 MORTGAGE FREE (First time!) 30/09/2016 🎉 And now we go again…New mortgage taken 01/09/23 🏡
Balance as at 01/09/23 = £115,000.00 Balance as at 31/12/23 = £112,000.00
Balance as at 31/08/24 = £105,400.00 Balance as at 31/12/24 = £102,500.00
£100k barrier broken 1/4/25SOA CALCULATOR (for DFW newbies): SOA Calculatorshe/her1 -
I always feel like a lone voice when I point out that no reputable debt advice charity will offer a DMP to anyone who can, if only on paper, afford their contractual debt repayments. In a DMP, creditors are asked to accept a reduced monthly payment, suspend interest and suspend recovery action. If a creditor sees that a debtor can afford their contractual payments, they have no incentive to suspend interest or recovery. Why should they when an SOA, which they do see, shows reasonable living expenses, contractual payments and still a balanced budget or surplus? A firm offering a DMP or other managed debt solution in this case would only be interested in the fees they could charge.enthusiasticsaver said:The £144 is correct as for some reason the income figure is showing as £2400 when it should be £2200 leaving a disposable income of £634 and remaining £144 after the £490 debt repayments.
If you really do have a £144 surplus then that would indicate you are managing ok but I guess you do not have money left at the end of the month so you need to find out where that missing money goes. You also need to put the interest rates on that soa. Why is your partner only earning £500 or is that their contribution to the household expenses and their income is kept separate? The groceries figure is huge for just 2 of you so that would be easy to reduce that. You definitely should not add it to your mortgage. Did you have debt before your dad died or has this just happened since your reduced income?
Whether or not you go down the DMP route depends on how disciplined you can be and the interest rates you are paying. If the rates are very high and the debt is not coming down then asking them to freeze the interest will impact on your credit record which presumably is not great anyway. That is the biggest disadvantage of a DMP in that you will need to default and your credit record will be disadvantaged for 6 years. I personally think you should reduce the groceries spend and throw as much at the debt as possible starting with the overdraft. Stopping using this and the cards is essential though.
I'd also point out that you don't HAVE to default to enter a DMP, although it's generally recommended by posters here. Some creditors will agree not to mark an account as in arrears or as AIP (arrangement in place) so long as payment is made via a DMP through a debt charity. Vanquis were, surprisingly, one of the best for this when I worked in the sector. Not all creditors will do this though, hence the advice to default and save an emergency fund before starting a DMP.
If OP answers the questions raised, more appropriate advice will be given but can we please move away from implying that DMP's are available to anyone who wants one?0 -
Get the cards on to 0%
https://www.moneysavingexpert.com/credit-cards/best-0-credit-cards/
and hit the overdraft
https://www.moneysavingexpert.com/banking/cut-overdraft-costs/
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I don't think the car lease is too bad a deal actually but it does represent a large portion of income in the OP's case. Additionally £40/month of fuel in an efficient car driven well actually gets you a fair distance0
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Just to add I think a spending diary would be useful. Loads of unexpected and random costs crop up all the time even for us budget monitoring folk. It's surprising where the money really leaks to.
I think your food costs could be reduced but you might need to check In with your gas and electricity supplier to check you are paying enough before you fine tune your budget, some of the price increases recently are shocking if you are not still in a decent fixed rate.the grocery challenge is a good thread to motivate you if you think that would help 😀Jan 18 Joint debts 35,213
Mortgage Jan 18- 77224 May 25- just under 65k
June 25 Debts in my name only £5170. DH can't keep track...1
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