I am a homeowner who has credit card and loan debt which is crippling me

Jackdaw23

Hello,
I am 3 years into a 25 year mortgage 5 years fixed term at 3%, in that time my wife and i have incurred significant debt, firstly for home improvements and then credit card and car etc.
We now feel at a point where we have so little to live on each month we cant even see a way of getting any of the credit card debt down. The loan repayment is £564 a month and will be going for another 4 years.
I have £100000 equity in my house, and looking at the market the house has increased in value by approx £75000 over the last 3 years. 
I have £11000 credit card debt and have had to get a small credit builder card just to get through which is now maxed at £600. My credit rating has taken a hammering obviously and is pretty low so my credit card and possibly remortgage options are not great. I am also concerned around the current situation with mortgage rates.
The mortgage is in my name as my wife had/has bad credit but if you look at my finances in isolation i clearly dont have enough as she contributes to managing our bills etc, so i am worried that any financial check on my ability to pay will flag this up and will need to include her and she is currently looking at going on a DMP due to how stressed we are financially,

I really dont know what the best option is. We are so cash poor that it is affecting our mental health and impacting on whether we can even take our children out for a drink and a bit of cake for example. We cant continue this way but i am also worried about borrowing our way out. I wondered about releasing some of the equity from the house to pay credit card and loan off and cutting the card up, but wondered how easy that is and whether i would be able to do it given i have a bad rating.
sorry for the long post (its my first) but just wanted to get as much information on as possible

thanks in advance
J

Andyjflet

As always in this scenario please post an SOA as a starting point including your wifes income which all needs to be looked at as one situation. The link can be found if you search SOA

Baron_Dale

First of all try not to panic.
On the plus side you own your own home which has increased in value.
You are absolutely correct to say that it would be daft to try and borrow yourself out of debt.
If you re-mortgage with your current provider I don't believe you will need to go through a credit check.
First of all you need to sit down complete an SOA. Hopefully someone soon will come along with the link. The SOA needs to be honest and realistic. When you have posted that people will be able to offer more suggestions and support.
Your debt is not insurmountable.
You have taken a courageous firsts step by posting here.

Baron_Dale

Here is the SOA Link
https://www.lemonfool.co.uk/financecalculators/soa.php
Don't forget to format it for the MSE Boards before posting. There is a button to do so on the page.

EssexHebridean

Good that people have already posted the links to the SOA. Get that completed accurately and honestly - you might find it helpful to sit down with six months to a year's worth of bank and card statements so you can work out your real spending. It needs to reflect the situation as it is currently, not what you would like to be spending or what you think we expect to see - an aspirational SOA helps nobody! 

Also - for the time being, stop paying the credit card debt. Is the loan secured or unsecured? If unsecured, then stop making payments to that as well. Your priorities right now are your mortgage and council tax, your utilities (Heat, light, water) and food for your family. Then insurances and essential travel costs. If the loan is secured on your home, then that is also a priority debt, and if you have any car finance for the time being treat that as priority as well - it may be necessary to examine options for handing cars back if this is the case, but there is time to get to that once your SOA is done.  Everything else is low priority at the moment - and I'm afraid that also means things like eating out. I appreciate that with school holidays coming up that isn't what you want to hear, but it's time to learn to make the cake at home and take a flask I'm afraid. 

Don't be tempted to think about consolidation loans, and definitely don't think about adding the debt onto your mortgage - that would be a real mistake. 

Get that SOA sorted and let's see what the options for you might be. 

sourcrates

Lots of people post on here for the first time in absolute panic as they fear they will not be able to afford there current financial commitments.

A common mistake always made is not separating secured (or essential) debt from unsecured (non-essential) debt.

All unsecured, nonpriority debt can be ignored if you have insufficient funds to pay everything, your priority is always your secured or essential borrowing, such as mortgage/rent/council tax/food etc etc.

Unsecured, non priority debt, such as loans and credit cards, are always last to be paid, and can be put on hold for as long as is necessary, or you can make token £1 payments, or enter debt management, whatever is appropriate.

That is your starting point to get out of this mess.

enthusiasticsaver

Firstly put that thought about borrowing from equity to repay unsecured debt right out of your head. Never convert unsecured into secured debt as it risks the roof over your head.  The only repercussions unsecured lenders have is to put a note on your credit file. 

Without seeing an soa it is difficult to say conclusively what your best option is but like others I think a DMP possibly so defaulting on the credit cards and loan if it is unsecured. That way you will be able to afford to  live without resorting to credit and your lenders will get what you can afford.  It usually has the added bonus that they freeze interest. 

MEM62

Jackdaw23 said:

We cant continue this way but i am also worried about borrowing our way out. I wondered about releasing some of the equity from the house to pay credit card and loan off and cutting the card up, but wondered how easy that is and whether i would be able to do it given i have a bad rating.

You cannot borrow your way out of debt.  It just does not work.  Also, turning unsecured debt into secured debt risks your home.  You need to post up an SoA so that the guys here can give you meaningful advice.  However, the bottom line will be that you first need to understand and address your overspending.  Then you need to see where you can cut back on general expenditure so that you have more cash to throw at your debts.  (You might also want to look at getting rid of the car and clearing the car loan.  Buy a cheap runabout to use until you are in a better financial position)       

Baron_Dale

Hopefully OP will be back soon with the SOA