50k on credit cards all out of 0%

thisisthecount

Hi there, Ltd - yes there's a business plan.

In terms of salary, pretty much 100K between us yes, possibly more some years. around 110 as it depends on the business

When you say don't remortgage for business, what's your advice here? 

twadds123

think we need some clarity here.

You say you earn 60-80k per year but also say business is tight at the moment.

So at the moment are you not earning 60-80k salary?  This is money you can actually take out of the business and pay yourself??

MattMattMattUK

thisisthecount said:

Hi there, Ltd - yes there's a business plan.

So you have used personal loans and credit cards to make business purchases? Are these properly structured, directors loans etc?

thisisthecount said:

In terms of salary, pretty much 100K between us yes, possibly more some years. around 110 as it depends on the business

So where is that money going? Between you both that is going to be about £6,500, with low housing costs why are you not using the majority of that to replay the personal debts? How can the business be tight, but also paying you £80k a year, those two statements directly contradict each other. 

thisisthecount said:

When you say don't remortgage for business, what's your advice here? 

If you remortgage for the debt you are going to convert £60k of debt which would at worst result into some CCJs and charging orders into debts which could lose you your house.

thisisthecount

at the moment yes, the business is tight, but I don't like the fact that the 50K on all the cards are varying degrees of high interest rates is my real problem I guess. Would be good to get them all on one lower loan I guess over a long period on a much lower rate.

Attached is the MBNA card for a start, and rates, seems really high 

Grumpy_chap

thisisthecount said:

Hi there, Ltd - yes there's a business plan.

In terms of salary, pretty much 100K between us yes, possibly more some years. around 110 as it depends on the business

When you say don't remortgage for business, what's your advice here? 

OK, so you started a new business and used CC funding for the start up capital, to buy equipment, stock, whatever.
That business is Ltd Co.
So you have made Director Loans to the business.
When did you start the business?
What is the current turnover of the business?
What is the nature of the business?
(This is not prying, but an attempt to understand.  Turnover and nature of the business will inform what you are able to draw from the business.  A consultancy service turning over, say, £120k will allow you to draw far more than a widget manufacturing business turning over £120k.)

Is that salary (drawings) level you state you are drawing true and current?  Given you have your own Ltd Co., I assume you are drawing the salary in a more tax efficient manner than all being PAYE salary.  In fact, if the Ltd Co is able to currently pay you that salary rate (or equivalent), there can be drawings without taxation as repayment of the Director Loans.

If I understand the thread correctly, your wife has a job (not at your Ltd Co) earning around £36k per year.  You separately have the Ltd Co., from which you are drawing £60k to £80k per year

Yet, you also stated:

thisisthecount said:

We're not able to make larger payments atm as the business is tight, hence why I can't make larger payments. 

This is not consistent.

You may wish to be in a position to draw £70k or thereabouts.
There may be a good plan that will work and reach that position.
It seems as though that is not the position as of today.

If we take your statements on current earnings at face value (wife = £36k plus you = £70k), you joint take home pay will be in the range £6.5k - £7k per month (could be much more if the drawings from the Ltd Co are optimised for tax efficiency.  You have low housing costs (fully paid and owned property).  A plan to clear £50k of debt will be very doable.
Are you bringing home £7k or thereabouts between you?  Real money, not just paper drawings from the Ltd Co.
OR, are you still ploughing money you don't have into the business start up?

Please do not bury your head in the sand on this.  The absolute honesty is critical.
Have you considered preparing you SoA?
It will help you if you do so - firstly to get things clear in your own vision.
Secondly, an SoA shared in the DfW will allow suggestions to be made for efficiency in the budget.

Finally, and you have not given enough information about your family and children etc (and you do not need to here), but even with your wife's earnings there may be a small entitlement to UC.  It is a bit more complex as you may be subject to the MIF (minimum income floor) but have you checked the status using an online tool such as entitledto?
It can be quick to do and, if it shows you are entitled to a small amount, that will be better than nothing.
If it confirms you are not eligible, at least you will know:
https://www.entitledto.co.uk/benefits-calculator/Intro/Home?cid=4b5cdf55-8a64-4cee-9cf8-1e184e69f9fb

Grumpy_chap

thisisthecount said:

at the moment yes, the business is tight, but I don't like the fact that the 50K on all the cards are varying degrees of high interest rates is my real problem I guess. Would be good to get them all on one lower loan I guess over a long period on a much lower rate.

I suspect that your opportunity to get from the current credit card rates to a more attractive "consolidated" loan rate is really rather slim as you simply do not have the income to allow a lender to lend against.
The £60k - £80k that you state appears as though it is not real and current.
Banks generally do not lend against an idea (which is what the business plan is).

thisisthecount

The 60-80k is real. Essentially I take out how much I need. Not sure why you don’t think it’s real? 

MattMattMattUK

thisisthecount said:

The 60-80k is real. 

If business was tight you would not be able to take those kinds of funds out.

thisisthecount said:

Essentially I take out how much I need. 

So where is that money going? Between you and your wife you are taking home about £6.5k a month, you said you have minimal housing costs yet are apparently unable to make dents in your debts, something does not add up.

thisisthecount said:

The 60-80k is real. Essentially I take out how much I need. Not sure why you don’t think it’s real? 

Some directors pay themselves in the early days by issuing dividend, but leave the money in thr business as a directors loan. It can be efficient long term for tax purposes but means there is not regular money being paid out of the business, so it is not "real" as such, but an accounting and tax efficiency trick.

Nebulous2

People don't believe that it is real because you are unable to use it to reduce your debt. If you had £6500 net a month, with little housing costs then you could address the debt quite rapidly. 

Do you have any offers on your cards? The MBNA one has some money at 0% and some you are paying interest on. They are often quite generous with offers, are there any offers on there? 

You still have quite a bit of unused credit, so there may be an opportunity to move some of it to low / no interest deals. 

Grumpy_chap

thisisthecount said:

The 60-80k is real. Essentially I take out how much I need. Not sure why you don’t think it’s real? 

OK.

You bring home £4.5k per month.  More if using tax efficient drawings.
Your wife brings home £2.5k per month.
That's £7k per month.
From that you have very low housing costs to meet.

Average UK salary is around £36k per year.
Two people each earning the average salary would bring home £2.5k each.  That's £5k per month.
They'd typically have to meet a £1k per month housing cost (could be much greater).

Use your extra £3k per month to clear down the £50k debts.
Problem solved

That is without even facing too much by way of day-to-day sacrifices in standard of living.
If you really focus on this and live a bit more hermit-like for a short while, you can really smash that debt.
Get the debt number falling and it will snowball as the interest drops each month so making even more of each £ used to cure the pain.