Overpay secured loan or husband’s secret credit card debt first?

IronicSaver763

Hi all,

Looking for some financial advice about which debt to tackle as a priority… 

Backstory: husband and I have our mortgage (about £180k remaining). Two years ago we took on a secured loan to consolidate credit card debt we both had. We took on a loan for £47k at a much better rate than the credit cards. The last 2 years we’ve worked hard and cleared £10k. We each kept a credit card for emergencies only and it’s come to light that my husband has been using his card regularly and accumulated £8.5k of debt. To make matters worse he stopped making payments and the account defaulted. It is now in the hands of a debt collection company. 

We are fixed in our mortgage rate for another 3 years and the secured loan is about the same. We intend to overpay the debt and get rid of it as quickly as we can. My question is which debt do we prioritise? 

The secured loan has interest and the amount left is £37k, the debt with the collection company does not have interest but is much smaller at £8.5k. 

Trying to put my own feelings aside here and be pragmatic (obviously I’m livid and extremely hurt that effectively the debt I thought we had cleared has been wiped out by his financial mismanagement). 

I do not intend on using any of my own money to help overpay the £8.5k out of principal (I’ve just started maternity leave and was also on maternity leave 2 years ago). I’m leaning toward husband paying the minimum amount required to the collection agency whilst both of us also overpay the secured loan. I’m just not sure if this is the best way to go or if my own feelings on the situation are clouding my judgment. 

Appreciate any advice you might have!

born_again

Secured loan all the way.

pjcox2005

IronicSaver763 said:

Hi all,

Looking for some financial advice about which debt to tackle as a priority… 

Backstory: husband and I have our mortgage (about £180k remaining). Two years ago we took on a secured loan to consolidate credit card debt we both had. We took on a loan for £47k at a much better rate than the credit cards. The last 2 years we’ve worked hard and cleared £10k. We each kept a credit card for emergencies only and it’s come to light that my husband has been using his card regularly and accumulated £8.5k of debt. To make matters worse he stopped making payments and the account defaulted. It is now in the hands of a debt collection company. 

We are fixed in our mortgage rate for another 3 years and the secured loan is about the same. We intend to overpay the debt and get rid of it as quickly as we can. My question is which debt do we prioritise? 

The secured loan has interest and the amount left is £37k, the debt with the collection company does not have interest but is much smaller at £8.5k. 

Trying to put my own feelings aside here and be pragmatic (obviously I’m livid and extremely hurt that effectively the debt I thought we had cleared has been wiped out by his financial mismanagement). 

I do not intend on using any of my own money to help overpay the £8.5k out of principal (I’ve just started maternity leave and was also on maternity leave 2 years ago). I’m leaning toward husband paying the minimum amount required to the collection agency whilst both of us also overpay the secured loan. I’m just not sure if this is the best way to go or if my own feelings on the situation are clouding my judgment. 

Appreciate any advice you might have!

I'd take the emotion out and would overpay the one with the higher interest rate which i presume will be the unsecured loan, and then keep meeting the payment obligations for the rest.

On your husbands credit card, what is the expenditure on? If it's things just for him e.g. hobbies and costs he didn't need to incur, or to a degree an addiction then i understand you asking him to sort.

If it's day to day living expenses, trying to provide support whilst you were on maternity leave or being used to find money to pay other debts then I think it's dual responsibility. Yes he should have communicated better with you, but likewise if you've got a monthly budget to get out of debt you'd probably notice those additional bits coming from somewhere without explanation and can't completely say it's all him.

Nasqueron

A secured loan can mean loss of the asset it's secured on, an unsecured loan can't - hence secured is better. If you are looking to overpay it to reduce interest overall plus term length that would seem sensible if it is affordable? However, if the other one has higher rates and is not frozen due to the default, it might be prudent to pay more than the minimum on it to avoid something like a CCJ which will mean longer bad credit 

fatbelly

It's slightly worrying that you thought you had dealt with the debt problem by moving it to a more dangerous place.

Hopefully you have now learned that consolidation does not deal with underlying issues.

Clear the secured loan as fast as you can

IronicSaver763

pjcox2005 said:

IronicSaver763 said:

Hi all,

Looking for some financial advice about which debt to tackle as a priority… 

Backstory: husband and I have our mortgage (about £180k remaining). Two years ago we took on a secured loan to consolidate credit card debt we both had. We took on a loan for £47k at a much better rate than the credit cards. The last 2 years we’ve worked hard and cleared £10k. We each kept a credit card for emergencies only and it’s come to light that my husband has been using his card regularly and accumulated £8.5k of debt. To make matters worse he stopped making payments and the account defaulted. It is now in the hands of a debt collection company. 

We are fixed in our mortgage rate for another 3 years and the secured loan is about the same. We intend to overpay the debt and get rid of it as quickly as we can. My question is which debt do we prioritise? 

The secured loan has interest and the amount left is £37k, the debt with the collection company does not have interest but is much smaller at £8.5k. 

Trying to put my own feelings aside here and be pragmatic (obviously I’m livid and extremely hurt that effectively the debt I thought we had cleared has been wiped out by his financial mismanagement). 

I do not intend on using any of my own money to help overpay the £8.5k out of principal (I’ve just started maternity leave and was also on maternity leave 2 years ago). I’m leaning toward husband paying the minimum amount required to the collection agency whilst both of us also overpay the secured loan. I’m just not sure if this is the best way to go or if my own feelings on the situation are clouding my judgment. 

Appreciate any advice you might have!

I'd take the emotion out and would overpay the one with the higher interest rate which i presume will be the unsecured loan, and then keep meeting the payment obligations for the rest.

On your husbands credit card, what is the expenditure on? If it's things just for him e.g. hobbies and costs he didn't need to incur, or to a degree an addiction then i understand you asking him to sort.

If it's day to day living expenses, trying to provide support whilst you were on maternity leave or being used to find money to pay other debts then I think it's dual responsibility. Yes he should have communicated better with you, but likewise if you've got a monthly budget to get out of debt you'd probably notice those additional bits coming from somewhere without explanation and can't completely say it's all him.

You’re right - take emotion out of it and just be practical. The credit card debt is now with a creditor who are no longer applying interest so it’s stuck at £8.5k. I’d imagine this will affect his credit but the damage may be done with that already…

The secured loan does have interest and is secured against our home so I think we do prioritise overpaying this one, whilst he pays the minimum to the collection agency debt. 

The actual situation of how he got the debt on the card is a whole other concern. I’d be inclined to agree with you about it being to help out with my being on maternity leave, but I prepared the months leading up to finishing for leave and saved hard. I continued to pay 50/50 for all our bills and expenditures and did not ask him for any help. I’ve asked him what the money has been spent on and his response was a cagey “mostly for us, I’m not really sure”. He refuses to discuss finances with me a lot of the time and trying to agree a budget to sort out this mess has been like pulling teeth. 

IronicSaver763

fatbelly said:

It's slightly worrying that you thought you had dealt with the debt problem by moving it to a more dangerous place.

Hopefully you have now learned that consolidation does not deal with underlying issues.

Clear the secured loan as fast as you can

I’m realising now how much of risk it has been doing this. And the biggest risk being that I might not be able to rely on my other half in the way that I thought I could. 

Appreciate you commenting back on this - I’ll absolutely focus on getting the secured loan cleared. 

retiredbanker1

What is the point of doing any of this?
You have unsecured debt now secured and could end in you losing your home and then your husband gets £8,500 of new credit card debt.

Until you batter his brains out and tell him no more you will be on a recurring cycle of debt each one higher than the last.

The only good thing about all this is that he has defaulted meaning his credit files are now wrecked.
Of course the new credit card debt could come back to bite you in 3 years or so - assuming you have joint mortgage and financial association - lets see what rate you get when you come to re-mortgage.

Sorry if you think this post brusque but I felt it needed saying.

IronicSaver763

Thanks @retiredbanker1. Sometimes it takes hearing it from a stranger on the internet for it to really sink in we need to have some more difficult conversations about his spending habits to be frank. 

Brie

Does he still have access to credit somewhere?  Like having a card for your credit card account?  or a bank account with an overdraft?  You might need to shut those down if he does.  

Good luck with it, it will take some time and strength but it's possible.

IronicSaver763

Thanks @brie! He doesn’t thankfully. He’s talking about a second job/pulling in overtime at work help. Hopefully actions speak louder than words.