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Debt Consolidation Load - Remortgage?
Tiny_Lemmy
Posts: 4 Newbie
Hi all, I'm in a bit of a debt spiral at the moment. I've got around £27K on credit cards. I'm constantly using my overdraft (£4500) to survive. Minimum repayments and bank charges are costing me around £700/month. I was hoping to get a consolidation loan to reduce these monthly costs but I can't get one.
I've spoken to my bank who are suggesting I remortgage the house. This doesn't make sense to me as my mortgage costs will nearly double (current rate is 1.59% - new rate ~5%).
I'm a bit stuck and any advice is appreciated. I don't understand how a consolidation loan can be rejected as it will reduce my monthly costs???
I've spoken to my bank who are suggesting I remortgage the house. This doesn't make sense to me as my mortgage costs will nearly double (current rate is 1.59% - new rate ~5%).
I'm a bit stuck and any advice is appreciated. I don't understand how a consolidation loan can be rejected as it will reduce my monthly costs???
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Comments
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Credit cards are unsecured debt - your mortgage is secured debt. It is unforgiveable of your bank - IMO - that they are suggesting that you shift unsecured debt to secured - there is *almost* never a good reason to do this.
A consolidation loan is one of those things that appears to be a good idea, but rarely is. Have a little browse down the board* - there is a very recent and brutally honest thread started by someone who shared their own experiences. You will come to realise that being turned down for this at this point is probably the very best thing that could have happened, I suspect.
Right now, you need to stop, take a breath, put the kettle on. Then you can pat yourself on the back for having asked for help and face the situation - that IS the hardest bit for most people. Once you'd acknowledged the issue, you can start to find solutions.
Next step - put together your SOA - statement of Affairs - you will find the link to the calculator we suggest in my signature below. You need to complete that honestly and openly, using the figures for the amounts you spend o things right now - not what you think you "might be" or "should be" spending - it needs to reflect where you are at this point. Then if you use the "format for MSE" option it will enable you to copy and paste it into a post in this thread, if you feel brave enough to do that? I promise we won't judge - we might tell you that you're spending too much here, or (oddly!) not enough there, and we might question some of your choices, but it comes from a position of wanting to help, so bear that in mind.
You might also want to consider asking the forum team for a change of user name if - as I suspect - your current one tells us a little more about you than you might actually want being on a public forum once you start adding further detail?
Everything is solveable - as one of our regulars on here sometimes says "It's only money" - and it IS. You can sort this out - you've already taken the first step to doing this, but risking the roof over your head is NOT the way forwards.
* linked in the next post🎉 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/her2 -
Link to the other thread I mentioned above: https://forums.moneysavingexpert.com/discussion/6418003/the-perils-of-consolidating-debts/p1🎉 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 -
[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......... 2Number of cars owned.................... 1[b]Monthly Income Details[/b]Monthly income after tax................ 3500Partners monthly income after tax....... 0Benefits................................ 0Other income............................ 0[b]Total monthly income.................... 3500[/b][b]Monthly Expense Details[/b]Mortgage................................ 760Secured/HP loan repayments.............. 355Rent.................................... 0Management charge (leasehold property).. 0Council tax............................. 260Electricity............................. 160Gas..................................... 110Oil..................................... 0Water rates............................. 80Telephone (land line)................... 0Mobile phone............................ 110TV Licence.............................. 14Satellite/Cable TV...................... 74Internet Services....................... 0Groceries etc. ......................... 600Clothing................................ 0Petrol/diesel........................... 80Road tax................................ 0Car Insurance........................... 40Car maintenance (including MOT)......... 26Car parking............................. 0Other travel............................ 0Childcare/nursery....................... 0Other child related expenses............ 0Medical (prescriptions, dentist etc).... 0Pet insurance/vet bills................. 80Buildings insurance..................... 10Contents insurance...................... 0Life assurance ......................... 60Other insurance......................... 0Presents (birthday, christmas etc)...... 0Haircuts................................ 0Entertainment........................... 0Holiday................................. 0Emergency fund.......................... 0[b]Total monthly expenses.................. 2819[/b][b]Assets[/b]Cash.................................... 0House value (Gross)..................... 250000Shares and bonds........................ 0Car(s).................................. 20000Other assets............................ 0[b]Total Assets............................ 270000[/b][b]Secured & HP Debts[/b]Description....................Debt......Monthly...APRMortgage...................... 122000...(760)......1.59Hire Purchase (HP) debt ...... 22000....(355)......3.99[b]Total secured & HP debts...... 144000....-.........- [/b][b]Unsecured Debts[/b]Description....................Debt......Monthly...APRMBNA...........................12000.....350.......20.9Barclaycard....................7400......210.......22.9Virgin.........................7200......70........0Klarna.........................1000......110.......0[b]Total unsecured debts..........27600.....740.......- [/b][b]Monthly Budget Summary[/b]Total monthly income.................... 3,500Expenses (including HP & secured debts). 2,819Available for debt repayments........... 681Monthly UNsecured debt repayments....... 740[b]Amount short for making debt repayments. -59[/b][b]Personal Balance Sheet Summary[/b]Total assets (things you own)........... 270,000Total HP & Secured debt................. -144,000Total Unsecured debt.................... -27,600[b]Net Assets.............................. 98,400[/b][i]Created using the SOA calculator at www.LemonFool.co.uk.Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]0
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No one ever has a haircut?
Partner doesn't work?
No Child Benefit?
How old are the children?
Unless they are 2 strapping teenagers £600 for groceries is way too much.If you go down to the woods today you better not go alone.1 -
Thanks for your comment
Partner doesn't work? She does but her money is spent on her & kids.
No Child Benefit? It goes to my wife
How old are the children? 11 & 13
Unless they are 2 strapping teenagers £600 for groceries is way too much. Might be something I need to look at...
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Do you not both share your household costs? If the children are yours, it seems odd that her income isn't covering household expenses too.
Have you been able to go through the situation with her? Does she realise that, for example, it would really help to reduce your monthly gas and electricity spend? Do you have a smart meter?
Cancel the satellite TV and just keep Internet. Can you get the mobiles down?Debt at highest: £8k. Debt Free 31/12/2009. Original MFD May 2036, MF Dec 2018.0 -
OK - clearly at the moment there is a shortfall but it's a relatively low one.Tiny_Lemmy 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......... 2Number of cars owned.................... 1 this is your car, so your expenses, yes?[b]Monthly Income Details[/b]Monthly income after tax................ 3500Partners monthly income after tax....... 0 OK - you've explained about thisBenefits................................ 0Other income............................ 0[b]Total monthly income.................... 3500[/b][b]Monthly Expense Details[/b]Mortgage................................ 760Secured/HP loan repayments.............. 355 Is this car finance or something else?Rent.................................... 0Management charge (leasehold property).. 0Council tax............................. 260Electricity............................. 160Gas..................................... 110Oil..................................... 0Water rates............................. 80Telephone (land line)................... 0Mobile phone............................ 110 This is extortionate! Why so high?TV Licence.............................. 14Satellite/Cable TV...................... 74 This is high for someone in debt - does it include internet?Internet Services....................... 0Groceries etc. ......................... 600 Yes - as already n=mentioned, very high. Presumably your partner contributes something to this too, this is just your share of the spend?Clothing................................ 0 This isn't realistic - at least you need to budget "socks & pants" money.Petrol/diesel........................... 80Road tax................................ 0 Zero rated vehicle?Car Insurance........................... 40Car maintenance (including MOT)......... 26 Does this cover your annual spending? (It might if servicing is included in any deal you have?)Car parking............................. 0Other travel............................ 0Childcare/nursery....................... 0Other child related expenses............ 0Medical (prescriptions, dentist etc).... 0Pet insurance/vet bills................. 80Buildings insurance..................... 10Contents insurance...................... 0 Tel me you do have this and have just missed it out for some reason? If not it needs sorting immediately - you can't afford NOT to have it!Life assurance ......................... 60Other insurance......................... 0Presents (birthday, christmas etc)...... 0 I assume you are spending in this area so you have to start budgeting for this.Haircuts................................ 0 Never?Entertainment........................... 0 Never a quick coffee while out and about, or a night out with friends? No takeaways?Holiday................................. 0 Again - you never even go for a weekend away or a trip to visit family perhaps?Emergency fund.......................... 0 You need to start putting something away for this[b]Total monthly expenses.................. 2819[/b][b]Assets[/b]Cash.................................... 0House value (Gross)..................... 250000Shares and bonds........................ 0Car(s).................................. 20000Other assets............................ 0[b]Total Assets............................ 270000[/b][b]Secured & HP Debts[/b]Description....................Debt......Monthly...APRMortgage...................... 122000...(760)......1.59Hire Purchase (HP) debt ...... 22000....(355)......3.99[b]Total secured & HP debts...... 144000....-.........- [/b][b]Unsecured Debts[/b]Description....................Debt......Monthly...APRMBNA...........................12000.....350.......20.9Barclaycard....................7400......210.......22.9Virgin.........................7200......70........0Klarna.........................1000......110.......0[b]Total unsecured debts..........27600.....740.......- [/b][b]Monthly Budget Summary[/b]Total monthly income.................... 3,500Expenses (including HP & secured debts). 2,819Available for debt repayments........... 681Monthly UNsecured debt repayments....... 740[b]Amount short for making debt repayments. -59[/b][b]Personal Balance Sheet Summary[/b]Total assets (things you own)........... 270,000Total HP & Secured debt................. -144,000Total Unsecured debt.................... -27,600[b]Net Assets.............................. 98,400[/b][i]Created using the SOA calculator at www.LemonFool.co.uk.Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]
I think we need a little more information on how the household spending works - your partner and her children live with you, yes? What contribution does she put in to the household costs - as obviously even your share of the grocery spending is quite high, your utilities bills look to be in the region of what we might expect for the household, you have a TV package being paid for etc, and council tax...The car I assume is yours, and you bear all the costs? Apologies, but your wording is a little unclear - are the children in the household your children, or are they your partners and you are now essentially treating them as your own?
On the debts - you mentioned an overdraft before that I don't think is shown in your SOA?
On the face of it, and with a few small tweaks elsewhere in the budget (reducing the cost of the mobile bill, TV Package and grocery spending for a start) you can make up the shortfall you have there - but when the Virgin & Klarna debt starts attracting interest you're going to be making far less impact on the totals.
I think subject to the answers to the questions already raised, a Debt Management Plan might be the way forwards for you. If you go this route then we would usually suggest that you stop paying the unsecured debt immediately and allow that to default before starting the DMP. The surplus that would otherwise have been going to debt should then be set aside to build an emergency fund as you will need this going forwards.
Regardless - I suggest that you open a new basic bank account with a bank that you do NOT have any debt with - and work to get your budget and spending into a position where you are living within your means.
Have you established the cause of the debt, allowing that your general spending when debt payments are removed from the equation seems to fall within your income - has that not always been the case?🎉 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 -
This is close to being do-able. Just throwing the child benefit into the mix would balance things.
Shame you're paying £355 per month for use of a car. Anywhere near the halfway point of that agreement?
P.S. Bank advice was rubbish as usual. Worse than rubbish. Positively dangerous.3 -
So your partners salary is spent on her and her kids and she does not contribute at all to bills or groceries? That is unfair and I would change that straight away regardless of whether the children are both of yours or just hers. Is it a joint mortgage and is the house in just your name or both your names?Tiny_Lemmy said:Thanks for your comment
Partner doesn't work? She does but her money is spent on her & kids.
No Child Benefit? It goes to my wife
How old are the children? 11 & 13
Unless they are 2 strapping teenagers £600 for groceries is way too much. Might be something I need to look at...
A consolidation loan is not the answer and you will not get one anyway due to the high level of unsecured debt you have and you will fail affordability checks given the cost of debt you already have. Are Virgin and Klarna not charging interest and if they are on a deal when do they expire? The fact you are paying high interest on the other cards suggests your credit record is not good enough to get a loan at a decent rate anyway. You need to keep a careful eye on your budget and either increase income or get your partner to start contributing.
I would tackle the overdraft first as that will be the most expensive. Most charge 40% interest now. You have over stretched with the car. If you only spend £80 on fuel do you really need it?
There are lots of gaps in the soa but similarly groceries are high. Getting a proper budget in place is the first step accounting for everything you do spend and saving for emergencies and tackling the overdraft. Are you able to get a 0% money transfer card to pay off the overdraft?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.
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Some excellent advice from @EssexHebridean and @enthusiasticsaver as ever, and I'm sure others will be along to support in due course too.
To add further comment about the consolidation aspect, speaking from my own painful and drawn-out experience, it doesn't work. At least not for me, for each of the probably four or five times I did it through loans and remortgaging.
I was in a virtually identical situation to you both in terms of debt amount, the number of credit agreements I had, and who I had them with. The last time we (that's 'we', not 'I' now - I'd tried to manage everything myself and protect my wife and family from it, but that's not good, you absolutely must address this as a joint problem) consolidated 'to sort out all our problems' was a £25K loan with Tesco - and we ended up virtually back in the same situation we were in. Consolidation takes incredible resolve, patience and commitment over what can be a very long period of time, and if you don't identify why the debt came about in the first place, address those behaviours, and remove existing opportunities to build up debt (ie, get shut of your credit cards) there is a very real risk of it all failing.
As others will also probably point out, whilst I have absolutely no doubt that you would use a consolidation loan to clear your existing liabilities, lenders won't look at it that way. They have to assume that you want to borrow another £27K on top of the £27K you already owe, and will conduct affordability tests accordingly, so there is no guarantee that you would actually be accepted for a loan anyway.
It's a really harsh wake-up call I know, but from your actions already - posting here and compiling what can be a very stressful to look at SOA - you clearly want to address things, which is a big step.
All I can really say is that we have had to be exremely honest with ourselves during the last two years of addressing our position. There is a lot of cutting back, no family holidays, very limited going out (not that we ever really did), looking at ways to increase income to chip away at debt and hammer down loan interest, and extremely close monitoring and tracking of our monthly spend. However, we have managed to clear two thirds of what was actually nearly £37K of debt at light bulb moment, and have done so without a DMP, so as @fatbelly says, this is do-able.
Good luck and take all the advice you can from the kind folk on here, they have been a lifesaver for us.6
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