Advice Needed

MrShotz

Hi All. This is my first post on this forum but I need advice.

So I'm in some financial struggles at the moment and I don't quite know how to get out of them. It all started off back in 2019/2020 and I brought a sizeable item through PayPal Credit and since then it all went downhill. I was regularly paying it off, but then I saw I could get other stuff through PayPal using PayPal credit, I went to that rather than my bank account. I then decided it would be a good idea to get a Credit Card and I did no real research into credit cards and got an Aqua credit card. That's where it went wrong. I got so used to spending on that card and then paying the minimum payment, it got out of hand. I was in £2000 worth of debt before I knew it. I was paying back the minimum payments but it was tough. Skip forward another year, the same thing happened. I had to get my mother to bail me out. Guess what happens next? I've been incredibly irresponsible and immature with my spending on this card and it's honestly getting me so down. I've got a 6 month old who I'm trying to provide for, and my partner is only on Universal Credit. Most of my monthly salary goes on rent (£1100/month) and council tax (About £130 i believe) and then the rest of it goes on the Argos Card, Aqua Credit Card and Paypal. I max out my Overdraft (£250) every month. I've had to ask my partner to help with the gas & electric payments because it's getting way too much for me. I can't keep up to date with what I owe & where. I wanted to speak to my bank face to face about the situation but trying to get through to my local branch is a nightmare. I'm getting destroyed by the interest on this Aqua card and it's making me so depressed. I can only afford to pay back the minimum payments which are like £340 a month. I can't budget at all because most of my pay check goes straight on credit cards. I've looked into debt consolidation loans and balance transfer cards but I really can't work out what the difference between them is. When I tried to apply for a balance transfer card, they could only give me part of the balance but I feel like that would add to my worries even more. 

Has anyone been in this situation before and have some advice?

mr_stripey

There lots of people who have been in this situation. There will be others along with advice I'm sure.

Generally speaking, borrowing more (in whatever form) is not going to help - it will make things worse so definitely don't do that.

marcia_

 You say you had to ask your partner to help with the utilities. Do they live with you? If so why are they not already helping pay for utilities? 

EssexHebridean

First step, stop paying anything to the credit card for the moment. You can contact them to let them know you are cancelling the direct debit, or just cancel it - letting them know might avoid a degree of hassle from them. when you contact them, let them know clearly that if they wish to contact you about the matter, that needs to be in writing, not by telephone. Be very clear that they are not allowed to telephone you. 

Second step is to put together a budget - a full proper household budget - as that is key to what happens going forwards. A good starting point is the SOA - statement of affairs - there is a link to the calculator this in my signature below. Complete it openly and honestly, and remember to include all income and outgoings - so even the things that get paid once a year perhaps like insurances. It needs to show you clearly where your money is going right now. Include the debt payments on there as though you were continuing to make them. 

Don't use a consolidation loan and don't take any further credit elsewhere either - that won't help. Much as your Mum thought she was helping you previously by bailing you out, she has just pushed you a bit further down the road until everything has come tumbling down. So this time, no handouts either - you need to follow the process now and actually fix the situation, not just paper over the cracks. 

It is fixable though - debt always is. It's just about finding the way, and we can help you with that. 

DisabledDan

MrShotz said:

Hi All. This is my first post on this forum but I need advice.

So I'm in some financial struggles at the moment and I don't quite know how to get out of them. It all started off back in 2019/2020 and I brought a sizeable item through PayPal Credit and since then it all went downhill. I was regularly paying it off, but then I saw I could get other stuff through PayPal using PayPal credit, I went to that rather than my bank account.

I then decided it would be a good idea to get a Credit Card and I did no real research into credit cards and got an Aqua credit card. That's where it went wrong. I got so used to spending on that card and then paying the minimum payment, it got out of hand. I was in £2000 worth of debt before I knew it. I was paying back the minimum payments but it was tough.

Skip forward another year, the same thing happened. I had to get my mother to bail me out. Guess what happens next? I've been incredibly irresponsible and immature with my spending on this card and it's honestly getting me so down.

 I've got a 6 month old who I'm trying to provide for, and my partner is only on Universal Credit. Most of my monthly salary goes on rent (£1100/month) and council tax (About £130 i believe) and then the rest of it goes on the Argos Card, Aqua Credit Card and Paypal. I max out my Overdraft (£250) every month. I've had to ask my partner to help with the gas & electric payments because it's getting way too much for me.

I can't keep up to date with what I owe & where. I wanted to speak to my bank face to face about the situation but trying to get through to my local branch is a nightmare. I'm getting destroyed by the interest on this Aqua card and it's making me so depressed. I can only afford to pay back the minimum payments which are like £340 a month. I can't budget at all because most of my pay check goes straight on credit cards.

I've looked into debt consolidation loans and balance transfer cards but I really can't work out what the difference between them is. When I tried to apply for a balance transfer card, they could only give me part of the balance but I feel like that would add to my worries even more. 

Has anyone been in this situation before and have some advice?

Don't feel bad about this, the whole financial industry is setup to put you in this position and make it hard for you to break out.

If you are in depression you can lookup breathing space on .Gov website or on the 3 big debt charities, if the depression is clinically diagnosed and ongoing you can get more time.  HOWEVER, do not see this as a chance to spend more money.

The simple fact is you spent more money that you had coming in and you got into that situation because you did not budget or understand your income and spending.

To answer your questions, debt consolidation means you take out a loan to pay off the debt you have on the credit cards, it is over a longer period and may not be cheaper, the downside of these is that it is not usually cheaper to pay them off early.  What is CRITICAL is that if you take out one of these loans you MUST destroy the credit cards and not take and more out.

While a zero percent card gives you all or part of the debt which is paid to the Aqua card, for an upfront fee of around 3% see the tips email, there are shorter ones with no fee or long ones with 3.45% fee.  If you have the self discipline they can get you out of this mess  

For further information visit the page dedicated to this search for best-0-credit-cards 

As far as I am concerned the ONLY purpose of the Credit Card is to give you protection on purchases over £101, but if you want that you should pay off the purchase a day later. Such a card should be a zero percent card but your credit score is probably going to get you turned down because in your own words you have been financially irresponsible.

The key thing when looking at your details is that the Aqua card has an interest rate of over 34% per annum, the Argos or ANY store card is another high interest mistake.

There are several ways to fix this situation, if you want to get a good credit record because you want to get a mortgage one day,  then the best way is to show you don't need credit by paying it all off, building up credit debt and being seen to be servicing the debt. For example putting all your debit card spending on a credit card and paying it all off each month.  You become a better risk if you are not using all the credit limits you have.

If you are able to get another bail out you need to be paying back that family member (with interest) so you feel the pain.  Otherwise you will jump right back into debt this process will be on rinse and repeat until they cut you off for good, usually at the cost of that relationship.  

You can't manage what you do not track, so get a copy of your credit file, this site shows a way to get free copies of the three main credit reference agencies. 

You then need to be determined to pay off that debt as your first priority before you spend money on other things, this means you will need to take a hard look at where your money goes.  The harsh reality is you have been buying things you WANT rather than you NEED.

I know you have a new baby but there is a site called Freecycle where you can ask for anything you need or look out for things people are gifting, all you need to do is be reliable and collect it when you say you will.  Sometimes is it tat but often people who are well off get rid of quality stuff way before it is not of any use and the beauty of it is that you can get stuff for now then trade up when something better is gifted, then you re-gift the thing it replaced. At first I got anything I could, but I have traded up to a bed frame that cost £2500 and a high end wardrobe that was around £2k, they cost me nothing.

I have been street homeless and lost all the pathetic assets I thought were important, when I was finally housed I furnished my home courtesy of Freecycle.  Everything from beds, curtains, blinds, glass shower guard, tv's, fridges, wardrobes, chest of drawers, washing machine, literally everything you can imagine.

As you are a couple you need to have a joint effort to get out of this situation, there is no point you pulling out the bath plug if your partner keeps turning the tap back on.

First things first click on the SOA Calculator that EssexHebridean has in the footer of her message above. You need to include both your and your partners income and outgoings 

The math solution of how you pay this off is quite simple, find out how much you have coming in from all sources, then find out how much the absolute essentials like rent and council tax are, heating is not an essential, a heat the person not the room approach (as shown on this site) will help you save more than you probably realise.

Food is a place you can save a lot, get a referral to a food bank or buy the food from the end of day reductions and freeze it.  Stop buying takeaways, I am proud to say I have never had a Deliveroo, Just Eats or Uber Eats in my life. I have had one Chinese Takeaway that I collected on my birthday and I made it last 5 days.

When you look at the credit you have you have to work out the plan and stick to it, that means you reward yourself with praise rather than getting gratification from buying stuff you do not NEED.

I remember having an overdraft for years with my bank, it was there for emergencies and I had three things go wrong with my car which is critical to me for my mobility.  My bank wrote to me and told me that they were hiking my interest rate to 39.9% and I knew this would cascade me into a nightmare, I was already making heat or eat decisions.  My income was around £6k and the debt was around £1500 and the most I was paying was around £50 per month.  If you do the math on the interest you will see why (like your cards the overdraft was never going to drop).

Balance       £1,500
Pay P/M      £50
Remain       £1,450
Interest       £48.21 (1450 * 39.9) = £578.55 per annum / 12 months = £48.21 
New Bal     £1,498.21
Net Paid     £1.79

So you pay off £50 but after interest has been added you end up paying off just £1.79 if you carried on at those rates it would take over 8.5 years to pay it off and it would cost over £3640 in interest. I worked out that if I managed to get together £250 (by selling a few things on eBay) and got a family member to lend me what I needed to pay it off I could pay the debt off in two years.  I made a higher payment of £60 a month to them at 5% interest (rates were sub 2% at the time). They agreed and that is what I did, I took great pleasure in cancelling that overdraft and telling my bank where they could stick that 39.9% interest rate. What was important to me was that it hurt to find £60, but I knew it would only be for 2 years and if my situation improved I could pay it off sooner.

If you can't get a family member to help you, then get that balance transfer zero percent card, it will reduce your debt on that portion of the debt by 30%. (Aqua is 33.4% the zero percent will be around 3%).

If you won't take the zero card then you need to go into draconian mode, that means you use every part of this website to cut back your spending, the more you save the sooner you will wipe all your debt.  Just remember need vs want.  Also your partner MUST be in on this too, their income must form part of the solution as well as their commitment to the spending.

If you are not in things together you will inevitably split up and that is a much harder life for both of you.   

You want to focus on the card with highest interest rate first. You also want to pay ANY and ALL surplus onto that card and the minimum payment on the remaining cards.

The other tip I will give you is a thing I have seen on this or other forums; on the day you are paid you look at your home banking app and check your balance the night before the income came in, you then transfer that balance to your savings account (open one if you do not have one).  Then you try to live on your budget for the next month and do the same thing next month.  If you get an energy gift from the Government you put it in that savings account.  While in draconian mode you do not fritter those savings on things you DON'T NEED, even the baby, they are oblivious at that age anyway.  

If you put up your SOA using the calculator above it will become clear where you are overspending and members can give you tips for particular things where you are paying over the odds. Make sure you include your partner, otherwise you are wasting your time.

The situation you want to be in is very simple, where you know how much is coming in, how much is going out (including servicing debt) and what you have left to put into the savings account.

There are also sites like turn2us which show things you may be entitled to or charities that may help you.

Take the advice offered here and you will avoid hitting a brick wall, mine was unavoidable but yours isn't.  I have no debt now except a very old one that is statute barred. 

For example you are probably paying your Council Tax over 10 months, you can ask them to spread it to 12 months and use the saving to increase your debt payment, you have probably paid £990 of your £1100 annual bill but if you spread it to £36.66 for the next three months you will release £73.33 towards the debt.  Every small saving makes a difference and from April if you pay over 12 months it will be £91.66 so release nearly £18 a month towards the debt.

Part of it is a mindset of saving, for example even though I get help from .Gov for heating I make every effort to cut back my energy use, we had a very cold spell in November, but I held off putting heating on until December and every day I measure what I have used, look at the weather for the week and work out when I can turn if off or if not down to the most efficient setting.

Meanwhile you can look at how to increase your income, it might require some further education or working on the side. Personal Finances and Business Finances are the same, if you can't increase the income you have to cut costs.