Aqua & Marbles - need advice as limits reached & minimum payments aren't covering interest

Saffypig

Our nephew confessed to us last night he and his wife are in dire straits with their finances!

The have 3 loans, but also Aqua and a Marbles credit card maxed to the limit.  £6200 total,  Crazy high interest rates (43% & 35%), they pay the minimum amount monthly, but of course the monthly interest rates are higher, so it's still going up.
I'm baffled, (but not really $$), why Companies are happy to lend them over half of their combined income without question.....

With the loans, and all their household expenses, they cannot afford to pay more on the cards.
I've asked them to both pull their credit reports, but i suspect very strongly they will not be eligible for an interest free card to consolidate.  And I'm not keen on them taking out yet another high interest loan to cover these.

The cards are the 1st issue to sort, but they have another 13k in loans, again high rates.

Help & advice please, my thought is to call the credit card companies and explain the situation, ask to freeze the accounts and arrange a pay off amount with them, over a term.  They have not yet missed any payments.
Will they be willing to do so, or are they better off missing payments, then the debt is sold off and they can negotiate a monthly plan with them?

We still have the loans to sort too, but they aren't eligible for a DRO as own a house, so more than 2k equity. only just mind!
 
What's the best plan of attack for the cards?
Thanks so much

[Deleted User]

The minimum payments will be covering the interest and some of the capital. If the balance is going up, then they're sill spending on the cards  - they have to stop that immediately.

Head to the DFW boards and post an SOA.

sourcrates

Credit card companies are not that good at payment arrangements, most will only agree to a temporary reduction in payments, say for 6 months, after that they would most likely want them to return to normal repayments, or seek debt help, so if their situation is going to be long term, which it sounds like it is, much better to default early on, avoiding arrangement to pay markers, and sort out a sustainable repayment plan as soon as possible.

As they are homeowners, this will likely be in the form of a DMP (Debt management plan) they should run their situation past stepchange or National Debtline, where advice is free, as is the setting up and running, of a DMP.

Only unsecured debts can be included, any loans that are secured, are a priority debt, and should be paid as per the original agreement, the rest are all non priority.

When they are working out a budget, make sure they account for some savings as well, an emergency fund if you like, as it will be needed.

Saffypig

Super helpful Sourcrates, thanks so much.

ManyWays

It sounds as though the cards have increased their credit limits while they were only making minimum payments? If so, then they may have good reasons to make and affordability complaint about this. Look at the Debt Camel website - there is probably a template letter there for refunds from credit cards.

This is in addition to a DMP as Sourcrates suggests, not instead of one. 

msallen

ManyWays said:

It sounds as though the cards have increased their credit limits while they were only making minimum payments? If so, then they may have good reasons to make and affordability complaint about this. Look at the Debt Camel website - there is probably a template letter there for refunds from credit cards.

This is in addition to a DMP as Sourcrates suggests, not instead of one. 

An increase in the credit limit has ZERO effect on whether the balance is still rising after a minimum payment. As ZX81 says, this is due to them still spending on the card.

CottonTail

Horrible situation for them but why do they not have jobs? they seem to be on an insanely low income and to have racked up so much debt. The reality may be they need to move to a cheaper area and start to live within their means.

eskbanker

CottonTail said:

Horrible situation for them but why do they not have jobs? they seem to be on an insanely low income and to have racked up so much debt. The reality may be they need to move to a cheaper area and start to live within their means.

Even if it was true that they're unemployed (and there's nothing in OP that says this), that's hardly a helpful comment.

The implied income from the OP is in £35K territory, which is hardly 'insanely low', although perhaps you misread the size of the debt, which was expressed a bit clumsily.