140k Unsecured debt - advice

Andyjflet

ldn83 said:

TheAble said:

One thing just to mention if you're considering debt solutions is the effect they may have on your job. You've mentioned you work in finance so there could be implications there e.g. if you need FCA approval and the like. I'm not too sure on the exact details but would recommend checking into that as one of your next steps.

Do update with the APRs as well when you get the chance, as well as expiry dates of any promotional rates. These will guide on how best to allocate capital.

Thanks for the heads up, I actually work in construction and my wife in banking but she does marketing for a big bank and so not directly involved in finance so this wouldn’t matter.

Be careful on this, I also work for a big bank and everyone in our bank has to complete the yearly training and tests as well SAF test to be compliant, and I mean everyone. 

ldn83

Exodi said:

Since the debt side has already been covered by the wonderful people on this forum, I just wanted to make a quick point on the investments, as to be honest I got major red flags reading it:

ldn83 said:

I lost around 20k in a bad investment which started during covid when everyone it seemed was trying to make it rich in stocks.

I'm a tad confused as the stock market starting during Covid was probably the biggest bull run we will ever witness in our lifetimes. It was a time where it was very hard not to make money, which was perhaps the reason so many people started popping up on social media dishing out normally bad financial advice as they believed that were suddenly experts because any random stock picks would usually print money at the time.

Despite the general market providing eye-watering returns, some got carried away with this and started dropping their life savings in individual stocks, often extremely volatile ones (e.g. GameStop), others got tricked into losing their money on alt cryptocurrencies and NFT's.

Those investing in global index funds (FTSE All World Index linked below) would have enjoyed a 50% increase from the start of the pandemic.

ldn83 said:

I still had some investments that were projected to double or triple so the borrowing was in the hope that the investments would rise and pay off the debt in 2-3 years. However, the markets declined hugely in ‘22 forcing me to cut my losses and face reality that the debt couldn’t be repaid by the investments.

While I'd hope that lessons may have been learned from the above, it's saddening to see you still have investments that you hope can double/triple in value and pay off your debt.

The markets corrected in 2022 following the ridiculous Covid surge (as can be seen above). I would seriously question the risk/volatility of the current assets you hold if there's a possibility for them to move in such a way.

While it's admirable you are facing your debts and people are helping you with this, I think you also need to address your investing/gambling decisions.

Small caps took a big hit during 22-23, everything is sold and losses cut a while back.

EssexHebridean

Sea_Shell said:

One other thing you could try...homework, if you like.

As well as keeping a spending diary, to track every penny...also keep a "didn't spend" diary.

So, every time you stop and think and decide NOT to buy something, you also make a note.

Over the next couple of weeks, try and identify, say, 10 things that you DIDN'T buy or spend on, and then reflect on how you feel about having saved that money and not bought the thing.

This is a great idea! When we cleared our first mortgage early, the OP’s were in part funded by “money we did know we had” which was any money we saved by renegotiating bills - haggling Sky or similar for example, plus anything we saved by not spending on something - so for example, we binned a planned takeaway - that meant we put that amount of money against the mortgage. It really encouraged us to stop and think how much we wanted to buy a thing, or would we rather see the extra sum in the Overpayment savings! It’s harder going this time though - having been an MSE’er for as long as I have, there isn’t too much left to haggle! 😂

katsu

I think you've been given an amazing idea about tracking "don't spends " and looking at how you feel. Well done for the idea @Sea_Shell.

As you say your wife doesn't drive and you are often away at weekends, and now that you don't need the car for moving things from the renovations as you've renovated... are you really sure you still need that car? Or a car at all? 

You could hire a car for holidays for eg as the car costs you thousands a year in running costs and you've still got the loan on it for circa 5% of your total debts. 

What do you want more? The car on the drive or less debt and more peace of mind?

Exodi

ldn83 said:

Exodi said:

Since the debt side has already been covered by the wonderful people on this forum, I just wanted to make a quick point on the investments, as to be honest I got major red flags reading it:

ldn83 said:

I lost around 20k in a bad investment which started during covid when everyone it seemed was trying to make it rich in stocks.

I'm a tad confused as the stock market starting during Covid was probably the biggest bull run we will ever witness in our lifetimes. It was a time where it was very hard not to make money, which was perhaps the reason so many people started popping up on social media dishing out normally bad financial advice as they believed that were suddenly experts because any random stock picks would usually print money at the time.

Despite the general market providing eye-watering returns, some got carried away with this and started dropping their life savings in individual stocks, often extremely volatile ones (e.g. GameStop), others got tricked into losing their money on alt cryptocurrencies and NFT's.

Those investing in global index funds (FTSE All World Index linked below) would have enjoyed a 50% increase from the start of the pandemic.

ldn83 said:

I still had some investments that were projected to double or triple so the borrowing was in the hope that the investments would rise and pay off the debt in 2-3 years. However, the markets declined hugely in ‘22 forcing me to cut my losses and face reality that the debt couldn’t be repaid by the investments.

While I'd hope that lessons may have been learned from the above, it's saddening to see you still have investments that you hope can double/triple in value and pay off your debt.

The markets corrected in 2022 following the ridiculous Covid surge (as can be seen above). I would seriously question the risk/volatility of the current assets you hold if there's a possibility for them to move in such a way.

While it's admirable you are facing your debts and people are helping you with this, I think you also need to address your investing/gambling decisions.

Small caps took a big hit during 22-23, everything is sold and losses cut a while back.

Small caps followed an almost identical trend to the all world index (see below), unless you mean you were investing in individual companies? I understand the correction that happened between between 2022 and 2023 (well I guess it's not fair to say it was just a correction, obviously the war in Ukraine at the start of 2022 would have also had a significant influence), but I commented as you specifically said "I lost around 20k in a bad investment which started during Covid", despite the markets rallying at the time.

You also mentioned other investments which also sound extremely volatile. If you're out the market now and have cut your losses, that's great. I don't mean to try and come across from a high horse, but I would offer a friendly suggestion to consider more diversified investments if you planned to invest in the future, e.g. global index funds.

ldn83

Exodi said:

ldn83 said:

Exodi said:

Since the debt side has already been covered by the wonderful people on this forum, I just wanted to make a quick point on the investments, as to be honest I got major red flags reading it:

ldn83 said:

I lost around 20k in a bad investment which started during covid when everyone it seemed was trying to make it rich in stocks.

I'm a tad confused as the stock market starting during Covid was probably the biggest bull run we will ever witness in our lifetimes. It was a time where it was very hard not to make money, which was perhaps the reason so many people started popping up on social media dishing out normally bad financial advice as they believed that were suddenly experts because any random stock picks would usually print money at the time.

Despite the general market providing eye-watering returns, some got carried away with this and started dropping their life savings in individual stocks, often extremely volatile ones (e.g. GameStop), others got tricked into losing their money on alt cryptocurrencies and NFT's.

Those investing in global index funds (FTSE All World Index linked below) would have enjoyed a 50% increase from the start of the pandemic.

ldn83 said:

I still had some investments that were projected to double or triple so the borrowing was in the hope that the investments would rise and pay off the debt in 2-3 years. However, the markets declined hugely in ‘22 forcing me to cut my losses and face reality that the debt couldn’t be repaid by the investments.

While I'd hope that lessons may have been learned from the above, it's saddening to see you still have investments that you hope can double/triple in value and pay off your debt.

The markets corrected in 2022 following the ridiculous Covid surge (as can be seen above). I would seriously question the risk/volatility of the current assets you hold if there's a possibility for them to move in such a way.

While it's admirable you are facing your debts and people are helping you with this, I think you also need to address your investing/gambling decisions.

Small caps took a big hit during 22-23, everything is sold and losses cut a while back.

Small caps followed an almost identical trend to the all world index (see below), unless you mean you were investing in individual companies? I understand the correction that happened between between 2022 and 2023 (well I guess it's not fair to say it was just a correction, obviously the war in Ukraine at the start of 2022 would have also had a significant influence), but I commented as you specifically said "I lost around 20k in a bad investment which started during Covid", despite the markets rallying at the time.

You also mentioned other investments which also sound extremely volatile. If you're out the market now and have cut your losses, that's great. I don't mean to try and come across from a high horse, but I would offer a friendly suggestion to consider more diversified investments if you planned to invest in the future, e.g. global index funds.

Thank you for the input, they were individual stocks not index or etf etc, Covid was the boom time, was up quite a bit, got greedy didn’t sell, then it fell and I kept averaging down, the old chestnut of rookie mistakes, lesson learnt. Once we’re on an even keel again financially in a few years I’ll be putting money into a diversified portfolio with a heavy dose of index. My wife also had some crypto holdings that went up then down, but she only lost a few hundred in the end. It’s a similar story from a lot of our friends, Covid was a strange time when there wasn’t much to do and with free money being dished out it was the time to try to make it rich for a lot of people, it’s all catching up now it seems.

scourses

Great idea on Don't Spends, Save an Emergency amount 1K then can you use majority of 8k Cash and pay off smaller debts, Can you change car for cheaper or buy outright?
No holiday this year and only entertainment rarely.
You can pay this off without DMP.
Will you both any pay rises this year? Overtime? 
We paid off all debts, was hard but but very good when done. 
I always have a look online at YouTube and other sites just to get any recommendations other people have with debt.
Good luck with it all 

enthusiasticsaver

ldn83 said:

SOA (sorry don’t have the APR% on hand)

Statement of Affairs & Personal Balance Sheet

Summary

Monthly Budget Summary	Amount(£)
Total monthly income	7,800
Monthly expenses (incl. HP & secured loans)	5,366.75
Available for debt repayments	2,433.25
UNsecured debt repayments	4,194
Amount short for making debt repayments	-1,760.75

Personal Balance Sheet Summary	Amount(£)
Total Assets (things you own)	524,500
Total Secured & HP Debt	-294,500
Total Unsecured Debt	-174,900
Net Assets	55,100

Household Information

Number of adults in household	2
Number of children in household	1
Number of cars owned	1

Income, Expense, Debt & Asset Details

Income	Amount(£)
Monthly income after tax	4100
Partners monthly income	3500
Benefits	0
Other income	200
Total monthly income	7800

Expenses	Amount(£)
Mortgage	1125
Secured/HP loan payments	222
Rent	0
Management charge (leasehold property)	0
Council tax	188
Electricity	160
Gas	160
Oil	0
Water Rates	33
Telephone (land line)	0
Mobile phone	120
TV Licence	13.25
Satellite/Cable TV	40
Internet services	40.5
Groceries etc.	700
Clothing	40
Petrol/diesel	150
Road tax	13
Car Insurance	83
Car maintenance (including MOT)	70
Car Parking	0
Other travel	0
Childcare/nursery	1700
Other child related expenses	60
Medical (prescriptions, dentists, opticians etc.)	20
Pet Insurance/Vet bills	21
Buildings Insurance	20
Contents Insurance	20
Life Assurance	0
Other Insurance	0
Presents (birthday, christmas etc.)	75
Haircuts	60
Entertainment	100
Holiday	83
Emergency Fund	50
Total monthly expenses	5366.75

Secured & HP Debt Description	Debt(£)	Monthly(£)	APR(%)
Mortgage	286000	(1125)	2.9
Hire Purchase (HP) Debt	8500	(222)	3.9
Secured & HP Debt totals	294500	-	-

Unsecured Debt Description	Debt(£)	Monthly(£)	APR(%)
Lloyds Loan	15500	355	0
Admiral Loan	23000	416	0
Novuna Loan	8000	167	0
HSBC Loan (wife)	8000	200	0
Virgin CC (wife)	6100	180	0
Lloyds CC (wife)	11000	330	0
MBNA CC (wife)	8700	260	0
Tesco CC (wife)	1450	34	0
Virgin CC	3200	85	0
MBNA CC	5250	200	0
Lloyds CC	14000	280	0
AA Loans	28000	441	0
Zopa Loan	22000	611	0
Updraft 2 Loan	11000	333	0
Updraft Loan	9700	302	0
Unsecured Debt totals	174900	4194	-

Asset Description	Value (£)
Cash	8000
House Value (Gross)	490000
Shares and bonds	0
Car(s)	16500
Other assets (e.g. endowments, jewellery etc)	10000
Total Assets	524500

First comment is do  not consolidate nor convert to secured loan and thankfully through skimming the thread you seem to have dismissed that idea. 

I think an IVA will be too rigid for you as you seem to want to cherry pick who and how much you repay and that won't work for SC either so if you are going down the DMP route you will need to self manage. I would not worry about your credit record as quite frankly more borrowing is the last thing you should be considering. Unsecured creditors are unlikely to take you to court and a DMP is an informal arrangement unlike bankruptcy which is also out for you given you have equity in your property and a fairly expensive car. 

You have a decent emergency fund of £8k which is a positive and you have a good income but high outgoings mainly of course the cost of servicing debt. Childcare costs will be with you for a while as even when free hours kick in there will still be additional costs and of course as your child gets older (or if you have a second child) wrap around care also costs especially in London. You don't mention what the APRs are but given you are at least £1000 per month over committed I do not see any option but for you to default and that should suspend the interest.  Some of the debts will be sold on but unless any of those loans are secured they are unlikely to go for CCJs. 

On the SOA the groceries figure is way too high for 2 adults and a baby and can easily be brought down with better budgeting and meal planning etc etc and using budget supermarkets.  Even with delivery passes if your wife doesn't drive you could bring the costs down by using own brand from one of the cheaper supermarkets. This will be a long slog, easily 6 years unless you are lucky getting F and Fs but you should easily be able to find around £2500-£3000 money per month to tackle the debt mountain if that soa is correct.  You need to stop using credit first though and actually live within the budget.  How accurate is the soa? Have you actually added up how much you spent over the last three months by going through bank statements? 

ldn83

enthusiasticsaver said:

ldn83 said:

SOA (sorry don’t have the APR% on hand)

Statement of Affairs & Personal Balance Sheet

Summary

Monthly Budget Summary	Amount(£)
Total monthly income	7,800
Monthly expenses (incl. HP & secured loans)	5,366.75
Available for debt repayments	2,433.25
UNsecured debt repayments	4,194
Amount short for making debt repayments	-1,760.75

Personal Balance Sheet Summary	Amount(£)
Total Assets (things you own)	524,500
Total Secured & HP Debt	-294,500
Total Unsecured Debt	-174,900
Net Assets	55,100

Household Information

Number of adults in household	2
Number of children in household	1
Number of cars owned	1

Income, Expense, Debt & Asset Details

Income	Amount(£)
Monthly income after tax	4100
Partners monthly income	3500
Benefits	0
Other income	200
Total monthly income	7800

Expenses	Amount(£)
Mortgage	1125
Secured/HP loan payments	222
Rent	0
Management charge (leasehold property)	0
Council tax	188
Electricity	160
Gas	160
Oil	0
Water Rates	33
Telephone (land line)	0
Mobile phone	120
TV Licence	13.25
Satellite/Cable TV	40
Internet services	40.5
Groceries etc.	700
Clothing	40
Petrol/diesel	150
Road tax	13
Car Insurance	83
Car maintenance (including MOT)	70
Car Parking	0
Other travel	0
Childcare/nursery	1700
Other child related expenses	60
Medical (prescriptions, dentists, opticians etc.)	20
Pet Insurance/Vet bills	21
Buildings Insurance	20
Contents Insurance	20
Life Assurance	0
Other Insurance	0
Presents (birthday, christmas etc.)	75
Haircuts	60
Entertainment	100
Holiday	83
Emergency Fund	50
Total monthly expenses	5366.75

Secured & HP Debt Description	Debt(£)	Monthly(£)	APR(%)
Mortgage	286000	(1125)	2.9
Hire Purchase (HP) Debt	8500	(222)	3.9
Secured & HP Debt totals	294500	-	-

Unsecured Debt Description	Debt(£)	Monthly(£)	APR(%)
Lloyds Loan	15500	355	0
Admiral Loan	23000	416	0
Novuna Loan	8000	167	0
HSBC Loan (wife)	8000	200	0
Virgin CC (wife)	6100	180	0
Lloyds CC (wife)	11000	330	0
MBNA CC (wife)	8700	260	0
Tesco CC (wife)	1450	34	0
Virgin CC	3200	85	0
MBNA CC	5250	200	0
Lloyds CC	14000	280	0
AA Loans	28000	441	0
Zopa Loan	22000	611	0
Updraft 2 Loan	11000	333	0
Updraft Loan	9700	302	0
Unsecured Debt totals	174900	4194	-

Asset Description	Value (£)
Cash	8000
House Value (Gross)	490000
Shares and bonds	0
Car(s)	16500
Other assets (e.g. endowments, jewellery etc)	10000
Total Assets	524500

First comment is do  not consolidate nor convert to secured loan and thankfully through skimming the thread you seem to have dismissed that idea. 

I think an IVA will be too rigid for you as you seem to want to cherry pick who and how much you repay and that won't work for SC either so if you are going down the DMP route you will need to self manage. I would not worry about your credit record as quite frankly more borrowing is the last thing you should be considering. Unsecured creditors are unlikely to take you to court and a DMP is an informal arrangement unlike bankruptcy which is also out for you given you have equity in your property and a fairly expensive car. 

You have a decent emergency fund of £8k which is a positive and you have a good income but high outgoings mainly of course the cost of servicing debt. Childcare costs will be with you for a while as even when free hours kick in there will still be additional costs and of course as your child gets older (or if you have a second child) wrap around care also costs especially in London. You don't mention what the APRs are but given you are at least £1000 per month over committed I do not see any option but for you to default and that should suspend the interest.  Some of the debts will be sold on but unless any of those loans are secured they are unlikely to go for CCJs. 

On the SOA the groceries figure is way too high for 2 adults and a baby and can easily be brought down with better budgeting and meal planning etc etc and using budget supermarkets.  Even with delivery passes if your wife doesn't drive you could bring the costs down by using own brand from one of the cheaper supermarkets. This will be a long slog, easily 6 years unless you are lucky getting F and Fs but you should easily be able to find around £2500-£3000 money per month to tackle the debt mountain if that soa is correct.  You need to stop using credit first though and actually live within the budget.  How accurate is the soa? Have you actually added up how much you spent over the last three months by going through bank statements? 

Yes self managed DMP seems best option currently. 

We are also toying with the idea of simply selling up before our 5 year fixed ends in Jan 25, realising the equity, paying down all the debt and moving closer to my wife’s family to relieve the childcare problem that we have. The issue is we have too much debt to be able to afford childcare, and yes the point about that the cost won’t end for many years is another reason that we need to find another solution really. We’ll see how the year pans out and if the property market picks up and interest rates come down we’ll definitely look at possibly selling up if we can get our target price of 500k. It was never a forever a home, we’ve already put a lot of value on it and we are looking at eventually moving out of London so perhaps sooner might be better than later.

SOA is pretty accurate. Groceries do need to come down it’s something we are now looking at. Car is essential and there is no scope of getting rid of it I’m afraid. It’s low mileage, super reliable and hardly lost any value in 18 months and we use it all the time, work, nursery drop off & pick up, visiting family all over the country and the usual essential errands.

We’re both due to take a step up in work this year so earnings should improve but we still need to make big changes to either not pay some of the unsecured debt or find another childcare solution. 

Lots of thinking to do!

The idea about noting down cost savings on things you don’t buy is brilliant, excellent motivator to save more.

ladyholly

I note you  are considering moving nearer to your in laws to help with cghild care. Are they agreeable to this? How old are they 9n dont answer that one) but bear in mind people slow down as they gewt older and looking after a toddler for hours a day can be exhausting not to mention they are more likely to develop health problems as they get older. I am not saying its not a good idea just be aware that they may not be able to continue in the long term or even in the short term.

Noting down what you dont buy is a great idea. My Mum and I used to go to London for the day sometimes (We are in the west country) and as we went round the shop we would count the cost of all the things we would like but didnt buy. It became a fun and free activity and we "saved" hundreds of £s even back in the 1970s.