Cannot see wood for the trees - persistent debt advice

nachocheese

Hello everyone, a long time lurker here.

Please can I have advice what can we do, as I cannot see the wood for the trees.

I'll do my and my husband's SOA after work when I get time but here is a rough outline of the problem:

Spiralling debt problem that started long time ago with one credit card, and now after two maternity leaves, student life (some time ago now) and trying to save my situation by taking out multiple 0% balance transfer cards to pay off the first debt here we are... 22k in debt with monthly minimum payments of over £750. We both work full time, I took on another part-time job to help me with repayments but 4 months later I can see that it's not sustainable long term. My second job starts at 4am and I can't continue doing this for much longer as I just started college so will need time to study (it's only one evening a week at college)

My main worry now is that we have to remortgage in Summer and a) the payments will go up because of rates being much higher than 5 years ago when we took out the mortgage, and b) we might not have access to best rates because of my poor credit rating c) I'm limited as what I can do with the debt for now. Probably can't default as that would be catastrophic for remortgaging, no?

I am really stuck in this vicious circle and don't see a way out. I know number one step will be writing down what we spend money on and keep it under control. But with two jobs and two children and now college I simply didn't have time. I'm starting to understand that I have a spending problem- not expensive shops but living above our means and not knowing where the money is going. I'm in the process of being diagnosed with ADHD and I know that comes with struggling to control impulses and spending...

Please help us shed some light if there are any options for us to better our situation. Thank you

sourcrates

Hi,

Well as a homeowner, you only have two real choices when it comes to "a way out".

The first is an informal, unregulated option, debt management, where you repay what you can afford to your non priority debts, rather than pay contractual repayments, this means lower payments over a longer time frame.

The second is a formal regulated debt solution, an IVA, a form of insolvency for homeowners, but I don`t think you have enough debt to benefit much from that, plus they are not really recommended due to the strict budgeting and fee`s applicable to them, it will most likely be debt management for you, but an SOA will confirm this.

Easy to solve this with a DMP most likely.

nachocheese

Thank you for your reply.

I'm reading on the forum about debt management and I wouldn't mind doing it myself and not through companies. My husband is less keen because of the implications to credit file. But how does it affect our remortgaging in a few months time? 

Brie

Start with the SOA and let's see what suggestions come your way.  Obviously you'll need to cut back on something to make things work for you but a DMP should be do-able if you're determined. 

Personally I might think it best to keep paying as best you can until you've got the remortgage sorted.  And see what you can do to boost your credit files that are easy wins.  Like making sure you're registered to vote.  Have a no spend month or two. Stretch the time between haircuts by a week+ etc.

See if you can cut back on using your overdraft.  Make the minimum payments to everything plus £1.  Try to make the situation look a bit less obvious.  

Meanwhile - don't think about adding any of this debt to your mortgage.  Please.  Get spending sorted out and see where you can go from there!  We've all been there one way or another.

sourcrates

nachocheese said:

Thank you for your reply.

I'm reading on the forum about debt management and I wouldn't mind doing it myself and not through companies. My husband is less keen because of the implications to credit file. But how does it affect our remortgaging in a few months time? 

Sooner or later the decision will be taken out of your hands as these things seldom get better on their own.

Your credit file should be the least of your worries right now, easy to say I know, but getting rid of the debt is the priority.

As to re-mortgaging, if you do so with your current lender, no credit check is done, only if you change lenders will that be an issue.

EssexHebridean

If you can’t maintain your minimum payments then one way or another you need to take a step to sort things out - and realistically that is going to have an impact on your credit files. What will have a bigger impact though is continuing to increase your debt because making the minimum payments leaves you too short for your priority bills, and so you have no choice but to reach for the cards just to get by.  Your decision now is about the route to take to minimise that damage, and make it last for as short a time as possible.

The big positive from where you are right now is that if you maintain your determination to get rid of the debt, you will come out of it more financially savvy, and better able to ensure that you don’t slip back in to consumer debt in the future. 

Get that SOA sorted and let’s take a look and see where you’re at. 

fatbelly

Summer is 6 months away. You can lock into a new mortgage deal now.

Your credit file will already show you have a lot of debt but it will be getting worse so see what you can do now.

You can always get another deal with your present lender.

nachocheese

Thank you all for taking your time to reply with advice, I really appreciate it. I didn't have time to do an SOA yesterday because my child being poorly. Life!

In the meantime things are really tense between me and my husband. He's really taken aback by my level of debt and what implications it has for us. I can understand his point of view too as he's not wrong about me not being able to manage money. 

I wanted to ask what my DMP will mean for him - we have a joint mortgage and one joint account for it (it's not used for anything else, I have my long standing personal account separate from him) More specifically how does it affect his credit report, if at all?
Will he be able to take out a new mobile phone contract for instance, or further down the line buy a car? (I'm thinking about credit file being affected for 6 years so is that 6 years of suffering for him?) Our situation is that he's a higher earner, supports the family in the proportion to his earnings and I go off and rack up debt while he's supporting the family so he feels it's unfair he has to suffer for my bad decisions. I'm just changing careers so I'm on much lower wages and had two children which has its own financial implications. 

Thank you for reading, I feel like I'm rambling now.

RAS

You need to close the joint account to protect your husband's credit record.

The mortgage has less effect and can be renewed now with your current supplier without a credit check, you should both sit down and look at what's available. 

nachocheese

RAS said:

You need to close the joint account to protect your husband's credit record.

The mortgage has less effect and can be renewed now with your current supplier without a credit check, you should both sit down and look at what's available. 

Thank you, I never thought a join bank account might be a risk so good to know to act on that. I had a look at our current mortgage provider - Santander - and the deals look good when compared to a general search on comparison websites for the whole market so that's reassuring. Our mortgage deal finishes on 2nd of August, so does that mean we can get a new deal from Santander on 2nd of February?

EssexHebridean

Allowing that from what you have said it sounds like some of the debt arises from maternity leave when presumably the household income fell, it is fair to assume that some of the debt arose from covering general household expenses? If so - and only if so - then it would be reasonable to gently point this out to your husband - not in an accusatory way, but just setting out the facts.  Almost always in situations with one party in a partnership being in debt there is at least some level of fault on the other party also - whether they turned a blind eye to seeing a lifestyle maintained as normal in spite of being aware that income had dropped significantly, or whether they chose not to challenge expensive purchases being made in spite of realising on some level that they weren't the sort of buys that would be covered from the normal monthly budget. 

Moving forward - you need a proper solid monthly budget that you both agree on, you need to ensure that your lifestyle in in alignment with the income you have to fund it, and you both need to sit down and review finances together on a regular basis - probably monthly initially. 

Check what Santander's viewpoint is on looking at and locking in new deals -but yes, if they say you can lock in 6 months ahead then set a diary note for 2nd February to start looking.