Any advice, got credit cards, loans, and more.

candle_light_express

I'm not sure this is the right category for me as my situation would happily fit into 3 (or maybe more) categories.  

My situation is a little difficult in the short term and is definitely unsustainable as is, but it's also potentially changing fairly quickly. I'm looking for advice any sensible actions I could take to cut down on interest being paid and reduce monthly payment amounts, or if I just have to live with my current situation in the short term. I realise I am quite lucky in terms of my income etc, and I've got myself into this situation, so I'm definitely not complaining, but any advice would be welcome.
 
Full situation:  

• Full time employed remote worker earning ~£4250 after tax per month.
• Living "with parents" in a bedsit type annex. I'm helping/helped them with some stuff which included paying for some of it up front so have agreed with them that rent and energy costs are covered by them for the next ~28 months.
• A vacant property for sale (my former residence), currently under offer for £170k (buyer has no chain & has mortgage in principle, I have no onward chain) contract not yet exchanged.
• A mortgage on the above property for ~£130k fixed rate expired last month, current interest rate tracking @~8.8%. Monthly figure ~£1,100.
• A car (recent valuation ~£33,500) balance on finance ~£34,500 @~4.9%, 20 months remaining. Monthly payments ~£500.
• A "bank" loan (up to date settlement figure ~£18,300) (12% iirc), current monthly payment ~£950 (~1.5 years remaining).
• Several Credit Cards (8). Total balance ~£42,000 of which £12-15k is currently on 0% interest cards ending various after oct this year.
• No Hard Searches on file since Nov 2022.
• Credit usage 62%.
• No missed payments in the last 6+ years.
• £5,500 in "savings".
• No dependents etc to worry about.

Prior to the mortgage fixed rate expiring I had been paying the credit cards down gradually. One (limit ~11k) is completely clear, four are at ~50% utilisation and the remaining 3 are at ~90% utilisation.
Since the mortgage rate changed I've switched them all to minimum payments.

My intentions, medium term are to have sold the property using the money to pay off non zero rate credit cards first, loan second if balance left over. Hopefully this will leave me with just the bank loan left to pay, at which point I can start making sizeable overpayments (or put the money aside, to settle it in one go, depending on if fees for overpayments).

In the short term, since the monthly cost of the mortgage about doubled, my outgoings on my bills (incl. council tax, electric, water, gas and insurance at my vacant property) and servicing my debts come to nearly my entire pay check and so other living costs (mostly food as I've cut the majority of other things) are eating into my savings.
When the property sale is completed the situation will change again, but it's in the early stages, so could take some time.

Things I've tried/considered:

I considered switching to a tracker mortgage with my current provider which was ~5.x% but they don't do one without an early termination fee, I calculated that accounting for that termination fee the break even point if I switched to that deal would be about 5 months and I definitely expect to have completed the sale within than period.

I also tried applying to switch to a tracker mortgage at ~5% with another provider who don't have early termination fees, but because the property was on the market (not under offer at the time) they were unwilling to continue the application because they considered it a "short term" (I suppose they are not necessarily wrong, especially since I received the offer a few days later). I didn't know whether I was obliged to tell them the property was on the market or not, but it felt dishonest to hide that fact.

Changing the bank loan: I think I'm in a bit of a catch 22 situation because I have am currently using credit in a way that means the monthly payments are high, but I can't reduce
I've tried asking the current loan company if they'd either give me a top up (to move more credit card debt to a loan) or be able to change the term to reduce the monthly payment, and they were not willing to offer either option, only suggesting that I apply for a new loan. I did try applying for a loan with my bank but they turned me down without doing a hard search (not surprised).

New credit card deals with 0% balance transfer offers are similarly unavailable, presumably because of my current high credit usage.

I'm also thinking that I will sell my current car very soon and am considering either picking up a cheap car (<£4k, high-ish miles, intended to last me for a year or two) or maybe using taxis along with borrowing my parents car when available.



I don't want to do anything that will have a further negative impact on my credit file long term, but I'm about out of ideas. I wasn't sure what the best way to clear the credit cards was, and whether it was better to keep any paid down credit card so it keeps my short term credit utilisation figure from shooting up, or if it would be better to close any such account. I am not at risk of going on a spending spree with these empty cards or anything like that.

If anyone has any thoughts I'd appreciate it.

Brie

It may be easier for people to comment if you put all your details into a statement of account (SOA - check one of the top posts in the forum).  If you fill in all the details about income and expenditure then post it back here and people can provide some helpful ideas.  

In the meantime you said:
Prior to the mortgage fixed rate expiring I had been paying the credit cards down gradually. One (limit ~11k) is completely clear, four are at ~50% utilisation and the remaining 3 are at ~90% utilisation.
Since the mortgage rate changed I've switched them all to minimum payments.

So - what card is it that has the £11k limit and is clear?  If it's MBNA you might want to keep an eye on it for new 0% deals - I've found that even at the worst times they've offered something.  If it's someone else you might want to consider closing it or getting the limit reduced.  This will make you look a better credit risk.  Same applies with the ones at 50% use - if there's an MBNA keep an eye on the offers and see it something pops up that will help a bit.  The others reduce the limits a bit.  

You say you aren't going to go on a spending spree but the card companies don't know that.  So the less credit you have available the better risk you appear to be.  

The other thing that helps is paying a bit above the minimum.  If a card is currently needing £69 paid set the payment at £70.  It makes you look more stable.  And it makes it less obvious that you're struggling as much as being on minimum payments does.  

The aim will be to have a couple less cards but all from different banking groups, MBNA, Santander, Barclays, Natwest are 4.  Natwest and RBS are the same group.  This was as deals open up you can do BTs from one to another whereas you wouldn't normally be allowed within the same group.  

Don't try to get another loan to clear the cards - it likely won't work (too big a risk of a spending spree!!) and it doesn't solve the problem for most people as they continue to use the cards.  

Glad you're thinking about it all though and that you have a plan - hopefully it will work for you!!!

enthusiasticsaver

Without seeing a soa it is  difficult to suggest but with repayments on the bank loan, car and mortgage adding up to £2550 a month with the credit card repayments on the £42k on top no doubt you are spending more than £3k each month just servicing your debt. Is the car finance PCP with a balloon payment?  Handing that back assuming you are more than 50% through the contract will save you £500 and you could use your savings to buy a low value one or do without one until the house is sold.  Was the bank loan a debt consolidation loan?  

Obviously once the property is sold that will make things much easier.  If you are living with parents there presumably aren't many more outgoings on top of the debt so are you saying that your spare £1250 is not enough to cover monthly outgoings (apart from debt)? A full soa will help see what you are asking as without knowing the minimum repayments and interest on the credit cards it is difficult to advise.  I would hazard you have been overspending for a while and assuming you do not want to ruin your credit record you really have no option if the mortgage cannot be moved, you cannot get 0% deals and the bank loan cannot be restructured.  The only leeway you have is with the car really although  the soa may help us suggest which credit cards you should target with the savings you have.  That and the car should be what you tackle first. 

candle_light_express

thanks for the responses. I'll look at doing an SOA

Andyjflet

First thing I would do would be to sell the car, using the savings pot to top up any shortfall, its vanity, the richest people I know drive second hand reliable cars. Buy it with cash, £3k for now. Keep £1k for an emergency fund, which you wont really need as you live with your parents. Then start using the £500 a month car payment saving into paying down your smallest credit card for the quick win.

This is a prime candidate scenario for the Dave Ramsey Baby Steps, follow the UK group version on Facebook and listen to the Ramsey podcasts and you tube shows. 

Also, stop worrying about credit scores, utilisation etc, just grab the bull by the horns, get intense and start paying down the debt, its a great feeling when you see it dropping, becoming debt free and the journey to it is a life lesson, doors tend to open for you along the way, you get given options, small wins etc and the feeling you are taking back control of your money. I have been there. My life changed radically. 

candle_light_express

SOA was worth doing as my memory is clearly faulty. There are a few clear differences.

I had a share/save scheme which I didn't expect to pay out because the options to purchase shares were worth less than 50% of my investment. There was no penalty for withdrawing so I've withdrawn which has increased my available cash and my net income.

I also overlooked the fact I'm renting some serviced office space as I was keen to keep work out of my residence.

Finally, I realise I could cut Gym and Counselling, but I'm a big guy and, with these services, for the first time in my life I'm loosing weight, not gaining it. So my thoughts on that are while not being in debt any more is very important to me, my health is even more so.

The mortgage payment for the month has gone out, roughly 50% of the card payments have gone out but the loan payment hasn't yet, so the cash balance will decrease shortly.

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

Household Information[/b]
Number of adults in household........... 1
Number of children in household......... 0
Number of cars owned.................... 1[b]

Monthly Income Details[/b]
Monthly income after tax................ 4380
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0[b]
Total monthly income.................... 4380[/b][b]

Monthly Expense Details[/b]
Mortgage................................ 1098
Secured/HP loan repayments.............. 488.79999999999995
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 124
Electricity............................. 64
Gas..................................... 34
Oil..................................... 0
Water rates............................. 29
Telephone (land line)................... 0
Mobile phone............................ 34
TV Licence.............................. 0
Satellite/Cable TV...................... 0
Internet Services....................... 0
Groceries etc. ......................... 0
Clothing................................ 0
Petrol/diesel........................... 100
Road tax................................ 52.5
Car Insurance........................... 48.45
Car maintenance (including MOT)......... 26.5
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 48
Pet insurance/vet bills................. 0
Buildings insurance..................... 35
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 25
Haircuts................................ 12
Entertainment........................... 114.37
Holiday................................. 0
Emergency fund.......................... 0
(Unnamed monthly expense)............... 0
Professional Subscriptions.............. 54
Office Space............................ 200
Gym/PT.................................. 130
Counselling............................. 175[b]
Total monthly expenses.................. 2892.62[/b]
[b]

Assets[/b]
Cash.................................... 11338.8
House value (Gross)..................... 170000
Shares and bonds........................ 200
Car(s).................................. 33000
Other assets............................ 0[b]
Total Assets............................ 214538.8[/b]
[b]

Secured & HP Debts[/b]
Description....................Debt......Monthly...APR
Mortgage...................... 130773...(1098).....8.8
Secured Debt.................. 34500....(488.8)....4.9[b]
Total secured & HP debts...... 165273....-.........-   [/b]

[b]Unsecured Debts[/b]
Description....................Debt......Monthly...APR
Virgin.........................3328.89...97.22.....23.29
MBNA 1.........................0.........0.........0
MBNA 2 bal 1/2.................4340......108.5.....0
Admiral Loan...................17940.6...996.6.....12.9
Paypal.........................4096.76...138.8.....21.9
Nationwide.....................7121.59...174.8.....17.9
Halifax........................5125.25...128.1.....0
NatWest 2......................9420.53...252.7.....19.95
NatWest 1......................3004.94...30.32.....0
MBNA 2 bal 2/2.................6219.96...295.8.....27.14[b]

candle_light_express

Oh. And I can't figure out if I can edit the above to add:
I don't know how much I am spending on Groceries. It was probably i.r.o. £300 a month before. But I have become a bit more concious of it recently so have been trying to decrease it.

Brie

No tv license and no broadband?  so you don't watch tv at all?

Any 0% BT offers on your MBNA to get rid of the amount on Virgin?  Not that the interest is that high but every bit helps.  Then if Virgin decides to offer a 0% BT you could use that to do something about the worst offender MBNA 2 at 27.14%.

Entertainment is very precise.  What's with that?

stymied

From your SOA it’s difficult to see how your budget balanced prior to the mortgage rate change.

5 months is a tricky period to hold out for without missing any payments. Anything you can do to reduce the monthly payments such as a 0% balance transfer would of course be helpful but it looks like you may have to sell your car plus reduce other outgoings to break even until your property sale goes through. How much would the tracker mortgage reduce the interest rate by? Even if it is more expensive in total, it might be needed to help with your immediate cash flow problem, unless it comes with a high fee.

candle_light_express

@Brie Yeah. I don't own a tv. My entertainment is mostly reading or youtube. When I'm not in my office I mooch broadband from my parents and/or use the data on my mobile contract.

No 0% offers on the MBNA right now. It was only a month or so ago it had a balance of ~10k on it and I used a lump sum to pay it off when the previous 0% balance expired because the apr would have been 30+%. I don't know how soon after something like that they'd offer a new 0 rate.

I agree the entertainmen figure is un-necessarily precise. I added it up from some exact charges and then added some rounded estimates but I didn't think to round the total.

@stymied You're right, I now realise that it probably didn't balance before and I simply hadn't noticed. Lesson learned, must write everything out.

Just got the accurate figures from Halifaz. The difference in interest rates of the mortgage is from 8.74% (as it is now monthly £1098) to either of their offers:
1. fixed rate, 2 years at 5.46% (£833 monthly) with 2% early repayment in the 1st year
2. tracker, 2 years currently at 6.09% (£881 monthly) with 1% early repayment in the 1st year
Assuming the tracker, the difference in monthly payments is £217 and 1% of my current mortgage balance is £1300, so the break even point is almost exactly 6 months.
I note I'm currently on a repayment plan and not an interest only so perhaps I could decrease the monthly figure with that. Not sure by how much or if that's a good idea at all.

The car is going. I just have to get it clean tomorrow so I can get pictures and then it'll be gone. A cheap replacement is in the works. Went to see one this evening, unfortunately I was a bit too tall. Have a couple more lined up for tomorrow evening. I expect within a week it'll all be sorted.

I'm thinking once I get the final figure for the car sale and the finance is cleared, with whatever shortfall (I estimate 1.5 to 2.5k) paid off. I can set aside an amount for a car (maybe 2.5k?) and set aside an amount for emergencies (maybe also 2.5k?). I can then look at what remaining cash (if the above figures are sensible I'd have ~3.8k) I have available and pay what I can towards the MBNA.

Does that sound sensible?

MFWannabe

it’s missed the end of your soa off so can’t see the balances/ shortfall 
Are you able to repost it?