Over £12,000 in debt - struggling!

Sparkleon

Hi everyone, please don't judge me.

I am a single parent of 2 teenage boys. I do not get any financial support from their dad. I currently do not work and I am a full time student at university. I have been looking for work, but every job I have applied for, are offering 4 hour contracts and as I am still on legacy benefits, I need a min of 16 hours to be entitled for working tax credits. Without the minimum 16 hours, I'd get no additional help, but would have to pay more towards my rent. I will inevitably be switched over to UC, but for now, I'm financially better off on legacy. I'll be £500 a month worse off on UC due to me being a student. 

I have over £12,000 in debt. I originally took out a 10k loan to consolidate old debts, but life happened and now I'm in more debt than I was. Debts are as followed:
- Loan - £5327.77 - Min payment is £361.83 a month and the interest is 19.63%.
- Lloyds credit card - £3824.08. £3631.24 is on an offer of 5.9% which expires 21/12/2024 and £278.84 at 28.9%. I'm currently paying £70 a month
- Barclays - £833.57. 30.18% APR. Currently Paying £60 a month. 
I also have a very account with £1794.47 but that is 0% interest on buy now pay later - I pay £140 a month.
AO - £268.99 - 0% until October 2023 - I plan to pay this straight off in September when I get my student loan. 

I am currently living on child tax credits, child benefit and student maintenance loans. I also receive DLA for my youngest child. 
With inflation, my food shopping has gone from £80 ish a week, to over £100 & thats just meats, veg, fruits, cereals, household essentials, etc. 

I don't go out. I don't smoke. I don't drink. I have reduced all my bills. Phones are on sim-only deals at £5 a month. Virgin is £30 a month just for internet. My usual bills - direct debits are low. It's the debt that's obviously racking it up. 

My incoming is just a little under £1500 a month. 

I really do not want to be taking another loan. My credit isnt the best (although I am trying to build this) but I am still getting quite high interest rate loans. For example, I checked with clearscore, and a debt consolidation loan is:

£12,000 over 48 months = £327.42 a month paying back £15,716.16. Paying back an extra 3k grieves me a bit. 

This is no excuse, however I grew up in a house with a mum who would wack everything on credit - littlewoods accounts, credit cards, etc and was in a lot of debt so I was never taught sensible money management. I am usually really organised and good with money. Always kept any credit to a minimum and paid it off end of the month, but lately after a bout of depression, I seem to have spiralled. 

Any help is greatly appreciated.

Thank you so much! 

fatbelly

I can't see how you can afford those payments on the income that you have. Debt consolidation seems doomed to fairly quick failure

As you say that your debts are drifting upwards, even though making payments, it sounds that you are robbing Peter to pay Paul.

I don't know how near the end of your course you are nor what your employment prospects will be, but it seems your choices are

stop paying and enter into some sort of debt management when you get employment
or
go for insolvency now. You would probably qualify for a Debt Relief Order

sourcrates

Please forget consolidation loans, no one ever got out of debt by consolidating, your just kicking the debt down the street all the time, to deal with at a later date.

A DRO would likely suit you, I`d go for it now, get rid of the debt once and for all, and allow you to live within your means.

lillypoo

Hi hun
No advice other than to say: listen to sourcrates and fat belly.  Between them I think I can say they've saved my bacon and that of many others who have asked for help and taken what's offered.

I think you're going to be OK. Keep an open mind and listen to the advice. I assure you, it can all be sorted x

ForumUser7

Sparkleon said:

Hi everyone, please don't judge me.

I am a single parent of 2 teenage boys. I do not get any financial support from their dad. I currently do not work and I am a full time student at university. I have been looking for work, but every job I have applied for, are offering 4 hour contracts and as I am still on legacy benefits, I need a min of 16 hours to be entitled for working tax credits. Without the minimum 16 hours, I'd get no additional help, but would have to pay more towards my rent. I will inevitably be switched over to UC, but for now, I'm financially better off on legacy. I'll be £500 a month worse off on UC due to me being a student. 

I have over £12,000 in debt. I originally took out a 10k loan to consolidate old debts, but life happened and now I'm in more debt than I was. Debts are as followed:
- Loan - £5327.77 - Min payment is £361.83 a month and the interest is 19.63%.
- Lloyds credit card - £3824.08. £3631.24 is on an offer of 5.9% which expires 21/12/2024 and £278.84 at 28.9%. I'm currently paying £70 a month
- Barclays - £833.57. 30.18% APR. Currently Paying £60 a month. 
I also have a very account with £1794.47 but that is 0% interest on buy now pay later - I pay £140 a month.
AO - £268.99 - 0% until October 2023 - I plan to pay this straight off in September when I get my student loan. 

I am currently living on child tax credits, child benefit and student maintenance loans. I also receive DLA for my youngest child. 
With inflation, my food shopping has gone from £80 ish a week, to over £100 & thats just meats, veg, fruits, cereals, household essentials, etc. 

I don't go out. I don't smoke. I don't drink. I have reduced all my bills. Phones are on sim-only deals at £5 a month. Virgin is £30 a month just for internet. My usual bills - direct debits are low. It's the debt that's obviously racking it up. 

My incoming is just a little under £1500 a month. 

I really do not want to be taking another loan. My credit isnt the best (although I am trying to build this) but I am still getting quite high interest rate loans. For example, I checked with clearscore, and a debt consolidation loan is:

£12,000 over 48 months = £327.42 a month paying back £15,716.16. Paying back an extra 3k grieves me a bit. 

This is no excuse, however I grew up in a house with a mum who would wack everything on credit - littlewoods accounts, credit cards, etc and was in a lot of debt so I was never taught sensible money management. I am usually really organised and good with money. Always kept any credit to a minimum and paid it off end of the month, but lately after a bout of depression, I seem to have spiralled. 

Any help is greatly appreciated.

Thank you so much! 

Sorry to hear this OP - have you checked if you’re eligible for social broadband? I don’t know the ins and outs, but if you’re eligible due to your benefits it would save you a bit of money each month ~ https://www.moneysavingexpert.com/compare-broadband-deals/broadband-social-tariffs/

Good luck

Sparkleon

fatbelly said:

I can't see how you can afford those payments on the income that you have. Debt consolidation seems doomed to fairly quick failure

As you say that your debts are drifting upwards, even though making payments, it sounds that you are robbing Peter to pay Paul.

I don't know how near the end of your course you are nor what your employment prospects will be, but it seems your choices are

stop paying and enter into some sort of debt management when you get employment
or
go for insolvency now. You would probably qualify for a Debt Relief Order

Whats a Debt Relief Order? Is it the same as an IVA?

sourcrates

Sparkleon said:

fatbelly said:

I can't see how you can afford those payments on the income that you have. Debt consolidation seems doomed to fairly quick failure

go for insolvency now. You would probably qualify for a Debt Relief Order

Whats a Debt Relief Order? Is it the same as an IVA?

No, different as chalk and cheese.

Differences between the two here -

Individual Voluntary Arrangement (IVA) & Debt Relief Order (DRO) Info, advice and help thread. — MoneySavingExpert Forum

RAS

Sparkleon said:

fatbelly said:

I can't see how you can afford those payments on the income that you have. Debt consolidation seems doomed to fairly quick failure

As you say that your debts are drifting upwards, even though making payments, it sounds that you are robbing Peter to pay Paul.

I don't know how near the end of your course you are nor what your employment prospects will be, but it seems your choices are

stop paying and enter into some sort of debt management when you get employment
or
go for insolvency now. You would probably qualify for a Debt Relief Order

Whats a Debt Relief Order? Is it the same as an IVA?

Err... No.

An IVA attracts fees of £6-9k and requires you to pay for 5+ years, based on your income. Good if you owe over £30k, have a house or a lot of assets to protect. Best if you have a stable income and you can end up paying more than your original debt rather than say 50%.

 A DRO requires that you owe less than £30k, your income is low, you have little or no excess income over expenditure and few assets. It lasts a year before discharge and costs £90.

Sparkleon

If I get a DRO, I'll struggle to get anything on credit again for a while?

RAS

Before anything else, do you run a car?

If you do anything other than make the required payments, on time, you will struggle to get credit for 6 years.

As you've already realised, even now you struggle to get credit at a reasonable price. 30% debt is not sustainable long term.

With IVA's, bankruptcy and managed DMPs you are not allowed to take out more than a very small amount of credit, usually with permission.

It may be better to stop paying everything, save up to the £2k limit for a DRO and then take the plunge.

Some nasty letters, default date back-dated to your DRO date if not already earlier and then slowly rebuild your credit record. 

enthusiasticsaver

I agree that a DRO seems your best option and taking on more credit is the very last thing you should be considering.  The debt consolidation loan has made things worse and until you get straightened out you will struggle to get affordable credit anyway.  Make a clean start and focus on living within your income. You  will not be able to afford those debts on benefits and student loans. 

When does your course finish?