Looking for help in the best way of paying off large debts
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lilmorph
Posts: 16 Forumite
My son has got himself into a deep hole with debts of ~£43k. I can lend him £15k to reduce this and hopefully get the debts paid off in 3 years. He is well paid and can get a small bonus some years but has less than £300 spare each month and his job involves travel and entertaining but no company credit card, so needs money until expenses are paid. Up until now this has involved him borrowing from family and not paying back. He has spoken to StepChange a while back and they helped advise him on setting up his DMP.
I am looking to help stop the cash flow issues and focus payments so that this debt is under control. He has a DMP and some of the debts have interest frozen.
Ignoring what he owes family his main debts are roughly:
There are some utility bills arrears which have to be cleared by a certain date. So have about £12k of the £15k to spread across the others.
Some thoughts and questions I have and was open to some feedback:
1) Make some F&F offers if it is worth trying with any of these organisations? Reading through on F&F the hit on the credit rating given the current state with the debts will be small and will allow him to allow him to start rebuilding it sooner. The only thing seems to be the offers are not accepted unless they think they will never be paid is this the case?
2) In lending this £15k I should make sure a contract is drawn up documenting this and payments, so it is including in the DMP going forward.
3) In starting to clear the PRA Group and others will they start charging interest?
4) He seems to have his DMP setup so he is not able to live properly. From what I have read he needs to be more forceful in letting these companies what he can afford rather than causing issues with him needing to borrow from family to keep up the payments.
5) If the F&F is not worth trying or turned down then our thoughts are between:
Option 1
Clear
The with either option having cleared these he would then increase payments on the remaining debts focussing on clearing debts which free up more cash to pay off quickly. As mentioned before will the companies receiving larger payments either stop their free interest or push for even larger payments or can he insist they accept his debt plan to clear the debts.
Are there any thoughts on these options?
I have also asked him speak to StepChange again but I'm interested in the other real world experiences on here.
Many thanks
I am looking to help stop the cash flow issues and focus payments so that this debt is under control. He has a DMP and some of the debts have interest frozen.
Ignoring what he owes family his main debts are roughly:
PRA Group - 2 debts - £18k (interest frozen) |
Moorcroft - £11.5k (27%) |
Lowell - £2k (38%) |
Cabot - £0.5k (49%) |
Creation - £6k - fixed payment |
Nationwide - £2.5k (34%) |
There are some utility bills arrears which have to be cleared by a certain date. So have about £12k of the £15k to spread across the others.
Some thoughts and questions I have and was open to some feedback:
1) Make some F&F offers if it is worth trying with any of these organisations? Reading through on F&F the hit on the credit rating given the current state with the debts will be small and will allow him to allow him to start rebuilding it sooner. The only thing seems to be the offers are not accepted unless they think they will never be paid is this the case?
2) In lending this £15k I should make sure a contract is drawn up documenting this and payments, so it is including in the DMP going forward.
3) In starting to clear the PRA Group and others will they start charging interest?
4) He seems to have his DMP setup so he is not able to live properly. From what I have read he needs to be more forceful in letting these companies what he can afford rather than causing issues with him needing to borrow from family to keep up the payments.
5) If the F&F is not worth trying or turned down then our thoughts are between:
Option 1
Clear
Nationwide
Capitol One (Lowell)
Aqua (Cabot)
and about £7.5k of Moorcroft
Option 2
Clear
Moorcroft
Cabot
and about £7.5k of Moorcroft
Option 2
Clear
Moorcroft
Cabot
The with either option having cleared these he would then increase payments on the remaining debts focussing on clearing debts which free up more cash to pay off quickly. As mentioned before will the companies receiving larger payments either stop their free interest or push for even larger payments or can he insist they accept his debt plan to clear the debts.
Are there any thoughts on these options?
I have also asked him speak to StepChange again but I'm interested in the other real world experiences on here.
Many thanks
0
Comments
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IMHO lending him money is not the answer.Is he really 100% on board with getting out of debt or just paying lip service to it because he has no choice ?9
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Why are the debt purchasing companies still charging interest?
When debts default, all interest stops, debts are not usually sold until after they default.
Some clarification is needed here!!I’m a Forum Ambassador and I support the Forum Team on the Debt free wannabe, Credit file and ratings, and Bankruptcy and living with it boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.For free non-judgemental debt advice, contact either Stepchange, National Debtline, or CitizensAdviceBureaux.Link to SOA Calculator- https://www.stoozing.com/soa.php The "provit letter" is here-https://forums.moneysavingexpert.com/discussion/2607247/letter-when-you-know-nothing-about-about-the-debt-aka-prove-it-letter0 -
I agree with molerat - lending him money just bails him out without him facing up to the issue(s) that are causing this situation. And HE has to be the one to get help - not depend on his parent to do it for him.
So once he's on board and facing up to this he needs to start by doing a statement of accounts. StepChange would have done one of these previously I suspect but it will need to be up to date. And then he needs to see what is causing the problem - living beyond his means somehow but where needs to be identified and addressed. Then tackle the debts starting with the one with the most interest and snowball down from there."Never retract, never explain, never apologise; get things done and let them howl.”0 -
I would clear as many in total as possible. Starting with Moorcoft, Cabot and Nationwide.
However I would call them and look at a F&F settlement on all of these, tell you you may have a certain amount of money from "wages" coming up and offer that, I would go start with 25p in the £1 see what they say, if they say no then tell them if they dont accept then you will be calling the next on the list and asking the same question, this might move them to take the offer.
So Moorcroft he/ or you says, I may be able to make you an offer of £2875 in full and final settlement of this account but this is all I have. You also need the acceptance in writing before making the payment in full.Baby Step 6/7 - £64000 saved for emergency fund DEBT FREE !!!
Currently Negotiating with HMRC !0 -
Much as you love your son, it has to be him that sorts this out. That means putting together a sustainable SOA and understanding how he got into this situation.
He then stops paying everyone for a few months whilst he makes sure his SOA fully reflects his needs and puts aside the money for an emergency fund.
Once the debts are defaulted, then interest and fees stop. So he needs to hold his nerve until the debt is defaulted and hopefully sold on. At that point, he starts to make regular affordable payments. A few years down the line full and finals offer might work, until then the creditors will not be interested in accepting decent discounts.The person who has not made a mistake, has made nothing1 -
molerat said:IMHO lending him money is not the answer.Is he really 100% on board with getting out of debt or just paying lip service to it because he has no choice ?0
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sourcrates said:Why are the debt purchasing companies still charging interest?
When debts default, all interest stops, debts are not usually sold until after they default.
Some clarification is needed here!!0 -
You will be wasting your money, as interest will still stack if the debts aren't defaulted
Much better to put the money aside and use it for F&Fs in a couple of years. You'll be able to parley that £15k to clear £30-45k by then.
Meantime get him on here for support. People know how make savings and there is a diary section where he can share whenever he's struggling.
Does his partner appreciate the extent of the problem? Rather too often we encounter partners whose expectations of the family income are not realistic because they don't fully know about the debt.The person who has not made a mistake, has made nothing1 -
RAS said:You will be wasting your money, as interest will still stack if the debts aren't defaulted
Much better to put the money aside and use it for F&Fs in a couple of years. You'll be able to parley that £15k to clear £30-45k by then.
Meantime get him on here for support. People know how make savings and there is a diary section where he can share whenever he's struggling.
Does his partner appreciate the extent of the problem? Rather too often we encounter partners whose expectations of the family income are not realistic because they don't fully know about the debt.
The original companies were Barclaycard, MBNA, Lloyds CC, Capitol One & Aqua.
He has said she is aware but not the full extent but she is doing extra work to bring in more . So that does need to be addressed and with the new baby a plan for family expenditure.0 -
So your son is happy for a parent to help bail him out and for his pregnant partner to work extra to increase her income - what is he doing to sort out his mess?
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