28k Unsecured debt, £15k windfall

redlady

Hi all,

It’s been a very long time since I’ve been on these boards but I could really use some advice.

I have managed to accrue 28k of unsecured debt (credit cards) and I have mowed through all savings I had ensuring I continued to meet the minimum payments up until now.  I just missed one payment at the start of this week and I feel like the sh*t is about to hit the fan.

I have someone close to me who’s offered me £15k to try and get me out of this hole with no requirement to pay it back.. I’m very privileged to have received this offer but I have no idea how to make this work best for me.

I’ve a perfect payment record until now but my credit utilisation is very poor due to being at max on all cards. One of the cards is over 34% APR but isn’t the highest balance.  Coming from a poorly financially educated background I’m really struggling to know what to do.

Does anyone have any advice on what I should do going forward? I am a full time unpaid carer with no prospect of being able to enter work any time soon and so the likelihood of being able to pay off any of my debts like this again are slim to none.

What would a sensible approach be considering the size of my debt? Any advice would be greatly appreciated.  Thanks  x

MorningcoffeeIV

Target the highest interest debt to save the most money and get the balance down the quickest.

Richard1212

Can you get Carers Allowance ? Google "Carer's Allowance Eligibility"

What level of total income does your household receive ? Total amount of savings ( if any left) ? Have you tried to move on to any 0% Credit Card offers ? Do you own a home ? Mortgage ? Rent ? Can you downsize whether owned or rented home ?

Without the answers to these questions ( and others relating to income/outgoings) , there is no-one on this forum who can possibly give an informed answer to your question.

But you have a real opportunity , due to your benefactor's generous £15,000 offer, to start pulling your way back now. Optimism !

Please provide more info and you'll find a lot of members here, including me,  who will be happy to give the best suggestions possible. Looking forward to hearing from you.

Rob5342

How did the debt arise? If you pay a chunk of it off without changing your spending habits then there is a danger that you'll end up back with the same level of debt.

fatbelly

Was the thinking of you friend (or you) that you should try to settle the whole 28k debt with the 15k gift?

EssexHebridean

@fatbelly is this OP a possible candidate for a DRO? 

Martico

Before you do anything, I think it'd be wise to calculate what your budget is. The fact that you're an unpaid carer suggests a low income, and I fear that if you use this generous windfall to pay off some of your debt, you may end up in the same position again, having thrown good money after bad. If your outgoings before servicing any unsecured debts exceed (or are close to exceeding) your income, then using the windfall to pay off some debt may just kick the can down the road rther than resolve the debt.  

First step would be to fill in an SOA (link above in EssexHebridean's signature) and if you're willing to share it, format for MSE and paste into this thread.

Good luck

fatbelly

EssexHebridean said:

@fatbelly is this OP a possible candidate for a DRO? 

Yes, potentially, as long as the 15k hasn't been dumped in an account in their name

redlady

Richard1212 said:

Can you get Carers Allowance ? Google "Carer's Allowance Eligibility"

What level of total income does your household receive ? Total amount of savings ( if any left) ? Have you tried to move on to any 0% Credit Card offers ? Do you own a home ? Mortgage ? Rent ? Can you downsize whether owned or rented home ?

Without the answers to these questions ( and others relating to income/outgoings) , there is no-one on this forum who can possibly give an informed answer to your question.

But you have a real opportunity , due to your benefactor's generous £15,000 offer, to start pulling your way back now. Optimism !

Please provide more info and you'll find a lot of members here, including me,  who will be happy to give the best suggestions possible. Looking forward to hearing from you.

Thanks for replying.

Yep, I do receive Carers Allowance! 

Exhausted all savings last week.  

Not eligible for any 0% cards as my rating has slipped to fair and both apps seem to indicate it’s due to credit utilisation mainly.

My home is rented via housing association.. I live in Scotland and receive Housing Benefit.

The debts are partly due to solicitors bills for quite a complex situation to do with my son and the local authority which is still ongoing.  There will not be any expenses repaid via this case.  Also partly due to being quite stupid financially and rather than making sensible decisions just used credit that was available to me.

I didn’t expect to receive the offer that I have, however I just felt that it mightn't be sensible to pay off two debts and leave the others untouched. Maybe it would be best to pay a percentage to each?  First thing I thought was that someone with better knowledge than me might be able to advise how best to get myself out of this hole with this amount making the biggest impact to my debts.

I’ve missed my most recent payment to MBNA and that’s the first missed payment which panics me.

SOA below 🫣

[font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]

Household Information[/b]

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

Number of children in household......... 1

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

Monthly Income Details[/b]

Monthly income after tax................ 2227.83

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

Benefits................................ 0

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

Total monthly income.................... 2227.83[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 0

Secured/HP loan repayments.............. 465

Rent.................................... 0 *HB*

Management charge (leasehold property).. 0

Council tax............................. 33

Electricity............................. 50

Gas..................................... 147

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

Water rates............................. 0

Telephone (land line)................... 20

Mobile phone............................ 50.77

TV Licence.............................. 13.25

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

Internet Services....................... 20

Groceries etc. ......................... 280

Clothing................................ 0

Petrol/diesel........................... 140

Road tax................................ 43

Car Insurance........................... 42

Car maintenance (including MOT)......... 96.29

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

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

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

Other child related expenses............ 0

Medical (prescriptions, dentist etc).... 0

Pet insurance/vet bills................. 25

Buildings insurance..................... 0

Contents insurance...................... 23

Life assurance ......................... 0

Other insurance......................... 91

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

Haircuts................................ 0

Entertainment........................... 0

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

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

Total monthly expenses.................. 1589.31[/b]

[b]

Assets[/b]

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

House value (Gross)..................... 0

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

Car(s).................................. 0

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

Total Assets............................ 0[/b]

[b]

Secured & HP Debts[/b]

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

Mortgage...................... 0........(0)........0

Hire Purchase (HP) debt ...... 23542....(465)......8.9[b]

Total secured & HP debts...... 23542.....-.........-   [/b]

[b]Unsecured Debts[/b]

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

MBNA...........................9874.47...444.......27.2

Barclaycard ...................6634.57...275.......24.45

Capital one....................2895.42...157.......30.34

Aqua ..........................8147.8....335.......34.8[b]

Total unsecured debts..........27552.26..1211......-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 2,227.83

Expenses (including HP & secured debts). 1,589.31

Available for debt repayments........... 638.52

Monthly UNsecured debt repayments....... 1,211[b]

Amount short for making debt repayments. -572.48[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 0

Total HP & Secured debt................. -23,542

Total Unsecured debt.................... -27,552.26[b]

Net Assets.............................. -51,094.26[/b]

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

Martico

Option one, if you want to pay the debt off and avoid doing so through a debt management solution:
Paying off the two most expensive cards would leave you with £3,958 of the £15,000 and save you £492 in monthly payments. 
You'd still have £16,500 of debt and a monthly shortfall for your minimum payments.

If you were to keep, say, £1,000 in reserve as an emergency fund to be accessed instead of credit, then you could shave almost £3,000 off the MBNA. While this would put you in a net positive position and able to slowly pay off the remaining two cards (minimum plus change), it would be quite a long journey on a tight budget. But it would be possible, assuming no nasty surprises. 

That's one option, others will have better ideas on alternative options for you

enthusiasticsaver

I would say the HP is a bigger problem.  Is that for a car? 

As you are on a fairly low income with no prospects of increasing in the near future I would go for the option of a DMP to get the interest frozen and then use the £15k gift at a later stage to offer full and finals. You have no savings and any gift you get given will quickly get whittled away by the monthly debt repayments and HP. Realistically you should  not be looking to borrow more money so ruining your credit record by missing payments doesn't matter. 

If you  do not want to go down the DMP route I would pay off the debts with the highest interest rate so  Capital and Aqua which comes to £11043.22.  Use £3k to pay  down the MBNA card and then keep the rest of the £15k as emergency savings.  Close the cards down and stop using them altogether.  They will not help you at all if you are on a low income. Pay down the remaining two cards as you can afford them but it will be a slog.