About to turn 30 years old and have 60K of debt!!!

Davehal7

Hi All, Posting here at last as I am desperate for some advice and support on how I can get out of Debt. I am 29 years old and have 4 children and currently have debts of around 60K (once balloon payment for car comes out next month) I have a good job and salary but am currently paying hundreds of pounds a month in debt but I am still getting into more debt and not sure what to do!! I have tried step change and they advised an IVA but i am reluctant to do this as i have a mortgage on part buy part rent scheme that is up for renewal next October! 

I bring home an average of £3400 a month after tax and outgoings are close to £3200

sourcrates

Well an IVA is an often mis-sold product, but in your case, it may be appropriate.

IVA`s are really meant for homeowners, who cannot go bankrupt, and who have a large amount of debt, you qualify on both counts there.

Re-mortgaging with the same lender does not normally require a new credit check, so there should be no issues on that score.

With a debt of 60k and rising, and not wanting to continue as you are, you only have two realistic choices.

(1) debt management plan, informal, you pay what is affordable, over a longer period of time, no legal protection (as yet) but with your debt standing at 60k, will take a very long time to clear, but possibility of settlement offers down the line.

(2) IVA, you pay over 60 months, an amount agreed by your creditors, you may need to re-mortgage in year 5, you get legal protection from further action, a formal insolvency option, requires discipline, and a long term steady income to complete successfully.

One formal, and one informal option, post your SOA and we can fill in the details (link is in my signature).

EssexHebridean

Good advice as ever from Sourcrates above. Definitely get your SOA (Statement of Affairs) completed and posted and we can have a look and see if there are any obvious savings that jump out. when you complete the SOA (You will find links to the calculators we recommend in both mine and Sourcrates signatures)you may find it helpful to have a years worth of bank and card statements standing by so you can be sure not to miss anything - remember the big annual spends too as well as all the routine monthly bits. 

On the home ownership side - are you concerned that the housing association for the shared ownership part of the property might have issues with you being in an IVA (if that should prove the right solution for you) or is it just the getting of a new mortgage deal that worries you?

Well done on dealing with the balloon payment for the car rather than just looking to roll on to another deal - that will at least give you an asset although it is also contributing to increasing your debt. Hopefully the car has been well maintained, is reliable and you are looking now to keep that for the foreseeable future?

Get the SOA sorted, post it in to the thread (use the "format for MSE" option, then copy and paste) and let's see what we can suggest. 

Davehal7

Thanks for the swift replies guys, I will endeavour to complete SOA and post it up here in due course.. I have a solid Job which should only continue to grow in salary (been here since i was 16 and now 2nd in command) 

Worries about Mortgage are regarding a new deal and not what housing association (orbit) think, is there a chance they wont like the IVA then?? 

yes the car is well maintained, a 2020 toyota yaris with only 25K miles on the clock (i will be mad not to pay the balloon as all i have paid so far is the £3000 deposit and then the £5000 balloon, family members have been paying for the monthly cost for last 42 months as a gift. If it is anything like my last yaris it should last until its dead which will be 200,00 miles or 13 years + ... I need a car for work as travel is involved too

Davehal7

Another thing I am looking into for some short term relief is the new mortgage charter where i can either switch to interest only for 6 months or extend my mortgage term, what are your thoughts on this and do you think one option is better that the other 

Sea_Shell

A SOA will give more detail obviously, but do you know (or have a hunch) how/why the debt was accrued?

A few big purchases, or lots of smaller ones over time? Or since the kids came along?

Knowing the cause is half the journey to a solution.

Do you have anything you can sell, or even return in the case of any very recent purchases? 

enthusiasticsaver

Seeing an soa would help pinpoint a way forward for you.  

If you are going to opt for help under the new mortgage charter I would opt for restructuring over a longer term rather than interest only.  Often people end up on interest only and never change it back so get to the end of the term of the mortgage then panic about how to pay it off.

Getting on top of this £60k debt should be priority after the mortgage and sorting out your budget.  How are you intending to raise the £5k balloon payment?

Davehal7

Morning Guys, Ok i have done the SOA however it does NOT include the £5000 for the car that i need to pay on 1st September.... So my thinking was get a £15K loan on around 6% from Natwest and use this to pay car balloon payment and they pay rest off credit cards to reduce to the minimum, was then considering going to intrest only mortgage for 6 montths to be able to clear the rest of the credit card debts so so i am then only left with loans to clear .. thoughts on this idea?? SOA is below:

Statement of Affairs and Personal Balance Sheet[/b][b]

Household Information[/b]

Number of adults in household........... 2

Number of children in household......... 4

Number of cars owned.................... 2[b]

Monthly Income Details[/b]

Monthly income after tax................ 3400

Partners monthly income after tax....... 0

Benefits................................ 150

Other income............................ 0[b]

Total monthly income.................... 3550[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 526

Secured/HP loan repayments.............. 0

Rent.................................... 312

Management charge (leasehold property).. 0

Council tax............................. 179

Electricity............................. 80

Gas..................................... 80

Oil..................................... 0

Water rates............................. 40

Telephone (land line)................... 0

Mobile phone............................ 86

TV Licence.............................. 14

Satellite/Cable TV...................... 0

Internet Services....................... 30

Groceries etc. ......................... 600

Clothing................................ 25

Petrol/diesel........................... 250

Road tax................................ 35

Car Insurance........................... 85

Car maintenance (including MOT)......... 0

Car parking............................. 0

Other travel............................ 0

Childcare/nursery....................... 0

Other child related expenses............ 15

Medical (prescriptions, dentist etc).... 25

Pet insurance/vet bills................. 50

Buildings insurance..................... 50

Contents insurance...................... 25

Life assurance ......................... 15

Other insurance......................... 0

Presents (birthday, christmas etc)...... 50

Haircuts................................ 25

Entertainment........................... 50

Holiday................................. 0

Emergency fund.......................... 0[b]

Total monthly expenses.................. 2647[/b]

[b]

Assets[/b]

Cash.................................... 0

House value (Gross)..................... 162000

Shares and bonds........................ 0

Car(s).................................. 10000

Other assets............................ 0[b]

Total Assets............................ 172000[/b]

[b]

Secured & HP Debts[/b]

Description....................Debt......Monthly...APR

Mortgage...................... 138000...(526)......2.49[b]

Total secured & HP debts...... 138000....-.........-   [/b]

[b]Unsecured Debts[/b]

Description....................Debt......Monthly...APR

Natwest Loan ..................8950......210.5.....4.4

Rate setter loan 1 ............5700......142.5.....4.9

Rate setter loan 2 ............9200......187.9.....3.7

Family Loan ...................18000.....211.6.....0

Barclays Credit card ..........500.......20........30.43

Halifax credit card............12059.3...280.6.....24

overdraft......................1500......55........40[b]

Total unsecured debts..........55909.3...1108.1....-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 3,550

Expenses (including HP & secured debts). 2,647

Available for debt repayments........... 903

Monthly UNsecured debt repayments....... 1,108.1[b]

Amount short for making debt repayments. -205.1[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 172,000

Total HP & Secured debt................. -138,000

Total Unsecured debt.................... -55,909.3[b]

Net Assets.............................. -21,909.3[/b]

[i]Created using the SOA calculator at www.LemonFool.co.uk.

Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]

Davehal7

Another thing to add is we will need to mortgage in October 2024 and our energy tariff will increase significantly from October 2023 as 2 year tariff comes to and end so i expect this will double in cost as I'm still paying something like 22p per Kwh at the moment 

fatbelly

I take it that you haven't missed any payments as yet.

How flexible is that family loan?

If they were happy to forego payments for a year, you could be getting a 5-year fixed mortgage in April next year with an unaffected credit record. Then you would know the numbers to work out what strategy was best.

I am thinking you may need a debt management plan, and an IVA wouldn't have much advantage if any. But, as you say, your soa could look very different next year depending on mortgage and energy payments.

The other thing I noticed is the car expenses which seem very high even though you have allowed nothing for maintenance. They are costing over £400 in tax, around £1000 in insurance and £3000 in fuel for the year. 

Davehal7

fatbelly said:

I take it that you haven't missed any payments as yet.

How flexible is that family loan?

If they were happy to forego payments for a year, you could be getting a 5-year fixed mortgage in April next year with an unaffected credit record. Then you would know the numbers to work out what strategy was best.

I am thinking you may need a debt management plan, and an IVA wouldn't have much advantage if any. But, as you say, your soa could look very different next year depending on mortgage and energy payments.

The other thing I noticed is the car expenses which seem very high even though you have allowed nothing for maintenance. They are costing over £400 in tax, around £1000 in insurance and £3000 in fuel for the year. 

Yes correct not missed a payment on anything my credit rating on Experian is 999 and has been for some time, everyone wants to give me credit! 

The Family loan is not flexible, they have already paused it in the past for far too long, this was a 25K loan to clear old debt and help towards a deposit for house, family member now needs to payment monthly 

Cars do sound about right thought, Wife has 14 plate astra estate and needs it for all the kids and school runs every day i drive at least 220 miles a week commuting for work