Consolidating Debts & Buying a New/Used Car

secla

Echo everyone elses thoughts, You could pay of your debt comfortably in a reasonably short time frame so taking an 8 year loan out even if you could get one, Car would depreciate quicker than you pay it off and you would probably want to replace it before you finished paying for it.

enthusiasticsaver

Your score is irrelevant. It means nothing to lenders who all have their own affordability criteria when scoring applications. If you are paying that much in interest presumably you already have debt on high interest rates which indicates that lenders consider you high risk. Taking on new debt shortly after a new mortgage is a red flag to a lot of lenders as it indicates you may have over extended. If you are paying high interest rates and only paying minimums you will not be making any dent in the debt so I suggest you post on the DFW board and maybe budget to pay more than minimums to start paying the debt off.

enthusiasticsaver

I would also say that the soa you have posted does not appear to have the £450 showing that you are currently having to pay to service debt which indicates you do not have £400 spare?

Gycraig

Could you not get a balance transfer card? 320 a month in interest is mental on that sort of debt.

DCFC79

Ditch Disney, Prime and Netflix and you save £336 a year, why have you got Amazon and Spotify, you can ditch Spotify and use Amazon Music.

simon_or

Your situation isn't that bad to be honest and 12k of debt with 65k income should be fairly easily dealt with.

First thing I'd do is transfer any high-interest CC debt to a 0% balance transfer card with the lowest fees, I think there's even a no fee one available.

Second thing is chip away at the OD and stop using it. At the very least, the £1,100 (holiday fund, emergency fund, pocket moneyx2) sit in this account with an OD rather than another pot where it's doing nothing 

If you still need more free cash flow to attack the 12k debt, consider increasing the term of your mortgage if possible (won't impact your rate or fix or lender) and diverting the extra cash to paying off the debt. Remember, this will probably mean that you pay more on mortgage interest over the lifetime of the mortgage if you don't overpay, but for now if you're on a relatively cheap fix, you'll save a lot of interest by doing this.

I won't comment on your choice of car as long as you buy used and a good reliable brand, it's quite an individual thing and you know best. You've been driving a cheap and modest banger for a long time so it's not like you like splurging on cars.

Finally review your list of expenses and see what you can cut down on or trim slightly, including the amount allocated to pocket money. A holiday of £250/month is entirely reasonable and perhaps (depending on one's circumstances) perhaps necessary to stay sane!

I really see no need to do what you're suggesting as it's a bit overkill to address what is a relatively small amount of debt in comparison to your income plus you're not living from paycheck to paycheck.

SaverRate

SamT93 said:

Hi, 

So over the past few years, my partner and I have accrued almost £12k in debt across overdrafts and credit cards due to life circumstances, buying a house and the unforeseen problems that come with that. I have never missed a payment, however due to the mortgage being relatively new and an issue with the electoral roll my Credit Score dropped from 980 to 672 in the space of a month. I queried this with Experian as it seemed an enormous drop but they assured me that the algorithm was working fine. Having resolved the electoral register issue, my score is now 771, not great but not terrible. My partner's score is still approx 950.  

We both have a stable income earning a combined £64.5k a year, (me £33k, her £31.5k). Our monthly outgoing budget is as follows:

Mortgage (fixed for 5 years)	-£1,067.64
Gas & Electricity	-£225.00
Water	-£40.68
Council Tax	-£164.77
Building & Contents Insurance	-£36.30
Life & Critical Illness Insurance	-£49.85
Wifi	-£30.00
TV License	-£31.80
Netflix	-£10.99
Prime	-£8.99
Disney+	-£7.99
Spotify	-£9.99
Phone Contracts	-£80.00
Post-Grad Student Loan/Other DD's	-£180.00
Gym	-£35.00
Food & Essentials	-£300.00
Car Insurance	-£30.59
Car Tax	-£11.81
Petrol	-£100.00

Total £2,421.40

This leaves us with approx £1,500. - we put £250 a month in a holiday fund, and a further £250 in an emergency fund and give ourselves an allowance of £300 each to spend on what we like i.e. out with friends, golf, PT classes, drinks etc leaving £400. 

I have worked out we are paying approximately £320 p/m in interest and try to pay slightly over minimum payments at around £450 a month but we are not making a dent in the debt. 

My car has just ticked over 100k miles and is on its last legs, just about scraping a pass in its MOT last month. It clangs, rattles and has a minor engine oil leak and basically needs to be sent to the scrapyard asap. 

We decided that the best option would be for my partner to apply for a loan of £30k with our bank with an APR of 5.4% over 8 years resulting in a monthly payment of around £380. This would pay off all the debts and leave us with £18k to spend on a used car. She was rejected for this based on affordability.  

We are now assessing our options, and looking for advice. We are thinking of submitting a joint application for a loan of the same amount, however, we are worried that my credit score will affect either the decision or the APR rate. We are even more worried that if we were to suffer another rejection, then getting any type of loan would be even less likely. 

We have thought about applying for a £12k loan just to consolidate the debt, and then get a car on a PCP finance deal, however, again my credit score means that I will likely not be offered the representative APR rate, and we cannot do it through my partner as she does not have a driving license (this appears to be a standard stipulation across the board that the person taking out the finance has to be the registered keeper and primary driver). Also, this option would mean that we would likely be paying more per month for two types of credit which is obviously something we would want to avoid. 

Any advice or assistance would be greatly appreciated. 

Thanks 

Home Insurance seems high but depends on your house?
Wifi seems high just for broadband? Have a look at the MSE comparison tool 
Do you use Netflix/Prime & Disney Plus and do you really need all 3?
Phone contracts if just for 2 seems high. Have a look at the MSE phone comparison tool. Can you take out a new contract for cheaper and if it includes a phone can you sell the existing one to pay off your current contract? Does that work out cheaper?
Gym seems on the high side but depends what gym, can you reduce or go to a cheaper gym? 
£300 each allowance to spend on what you like seems high per month
Can you divert the holiday fund to pay off your debts? 

exharris

Not sure how relevant but wanted to say this...

if you buy a used car they may try and sell you an extended warranty. Be careful to check the terms! It could have a 'single claim limit of £1000' - which is useless if your engine goes as this could cost about £3k!  Be careful to check the terms and conditions.

[Deleted User]

I think it can be assumed that as the OP was not given the answers he wanted to hear he has disappeared. The solution to paying off their debt was very clear, but they obviously did not want to give up a life that needed £850 a month luxury money! Hopefully, they did not pursue the loan consolidation route but unfortunately I suspect that may well have done!