Looking for a little guidance to start my journey towards becoming debt-free.

IRunFar

Hello,

I’ve been reading the advice on all the different threads about this, but there’s quite a bit to digest! So, I thought it might be best to ask a few questions about my own situation so I can create the best plan for me and mine. I currently have a little over £60k of unsecured debt caused (mostly) by some significant life changes. I'm now having a tough time keeping up with all the monthly payments, and the interest on some of the debts is just eyewatering. 

I'm fairly positive that by the end of this year, I'll be able to settle some, if not all, of my debts when I can access a lump-sum drawdown from my pension. I understand this isn't the ideal solution, but honestly, I can't think of any other options since I don't have any assets to speak of - I just rent my house. I don't plan to fully retire for a few years yet (I'm currently 54), and maybe I'm being delusional, but I wonder if once I've cleared my debts, I could begin to grow my retirement savings through investments, savings, or even extra contributions to my current pension pot. 

I'd be so, so grateful for any advice on the following:

Should I reach out to my creditors and explain my situation, maybe even propose some token payments for now?

Or would it be better to just default and wait it out until I can sort out a payment arrangement with any DCAs who may end up buying the debts? If I do this, should I still let my creditors know I can't pay?

Do I have to tackle all the debts at once, or can I just focus on the larger, more expensive ones and keep making my contractual payments on the smaller ones? Will this outrage any of the lenders (who are Evlo Loans, Plata, Monzo Loans, Monzo Flex, Zable, Aqua and Capital One). 

A wee bit more context - I have a son who is about to start University, which has been on my mind a lot. I really want to support him in staying debt-free if I can. Finally, my credit rating is already shocking, so I suppose whatever I do next can't make it any worse, right? 

Thank you all so much for taking the time to read this. It's comforting to know you're out there!

ManyWays

Should I reach out to my creditors and explain my situation, maybe even propose some token payments for now?
Just explaining your situation may not go well. You havetell, not chat or ask, either make them an offer or stop paying and not talk to them. 

i think it's a bad move to plan to clear the debt by accessing your pension early. You need that money for your retirement. And if you take it out now, there may be tax implications now and later if you hope to make more pension contributions, but you would need to talk to an expert about those.

That is a collection of expensive lenders, they have lent you too much and they can wait and be repaid slowly

It's better to treat all your creditors the same, your credit score is going to get poor anyway, it won't be much better if you carry on paying some small, cheap debts.

Why not post a Statement of Affairs and get some more specific advice?  If you will be giving your son an amount each month to help him through uni, put this cost on the SOA as September is coming up fast! https://www.stoozing.com/soa.php

IRunFar

Thank you, ManyWays!

I’ve followed your suggestion. It wasn't the most enjoyable experience, but it's always best to face the numbers head-on I guess. I can see where we can cut back, and I'll start making those changes right away. However, it won't fully address the issue we're facing clearly! 

I've included a £200 Household Emergency Fund that we haven't actually been building up yet, but would like to - and I've added £400 plus a little extra for groceries to cover the upcoming university expenses. Mobile phone costs are currently quite high since we're tied into pricey contracts, but they'll be ending soon! Then we can switch to Pay as You Go options. 

Household Information

Number of adults in household........... 3

Number of children in household......... 

Number of cars owned.................... 1

Monthly Income Details[/b]

Monthly income after tax................ 4439

Partners monthly income after tax....... 1925

Benefits................................ 0

Other income............................ 0

Total monthly income.................... 6364

Monthly Expense Details[/b]

Mortgage................................ 0

Secured/HP loan repayments.............. 0

Rent.................................... 1600

Management charge (leasehold property).. 0

Council tax............................. 166

Electricity............................. 80

Gas..................................... 0

Oil..................................... 100

Water rates............................. 40

Telephone (land line)................... 0

Mobile phone............................ 205

TV Licence.............................. 14

Satellite/Cable TV...................... 50

Internet Services....................... 77

Groceries etc. ......................... 585

Clothing................................ 100

Petrol/diesel........................... 255

Road tax................................ 30

Car Insurance........................... 59

Car maintenance (including MOT)......... 40

Car parking............................. 0

Other travel............................ 200

Childcare/nursery....................... 0

Other child related expenses............ 400

Medical (prescriptions, dentist etc).... 200

Pet insurance/vet bills................. 0

Buildings insurance..................... 0

Contents insurance...................... 19

Life assurance ......................... 0

Other insurance......................... 0

Presents (birthday, christmas etc)...... 100

Haircuts................................ 100

Entertainment........................... 140

Holiday................................. 100

Emergency fund.......................... 200

Total monthly expenses.................. 4860

Assets[/b]

Cash.................................... 0

House value (Gross)..................... 0

Shares and bonds........................ 0

Car(s).................................. 0

Other assets............................ 0

Total Assets............................ 0

[b]

No Secured nor Hire Purchase Debts

[b]Unsecured Debts[/b]

Description....................Debt......Monthly...APR

Plata..........................5500......324.......34.9

Oodle..........................10755.....267.......18.7

Monzo Loan.....................6965.22...174.......33.4

Lendable.......................2130......96........23.5

Monzo Flex A...................2000......190.......29

Monzo Flex E...................3517.51...284.5.....29

Capital One A..................2000......100.......30.34

Aqua A.........................6000......360.......29.6

Elvo...........................10000.....453.......52.9

Aqua E.........................2021.77...100.......29.6

Capital One E..................1788.86...97.1......30.34

Zable..........................1497......75........43.15[b]

Total unsecured debts..........54175.36..2520.6....-  [/b]

[b]

Monthly Budget Summary

Total monthly income.................... 6,364

Expenses (including HP & secured debts). 4,860

Available for debt repayments........... 1,504

Monthly UNsecured debt repayments....... 2,520.6

Amount short for making debt repayments. -1,016.6

[b]Personal Balance Sheet Summary

Total assets (things you own)........... 0

Total HP & Secured debt................. -0

Total Unsecured debt.................... -54,175.36

Net Assets.............................. -54,175.36

tigergambit

Hi IRunFar,

At 54 I think that you can forget about Credit Score. You are not likely to need a mortgage now and your earnings are sufficient for you not to need more credit. That's good as it allows you other options.

You really shouldn't be considering pension drawdown imo. That will cost you a lot in the long term. You are not in a position to need that yet.

You seem to have multiple cards with a few lenders. I suspect that you may be able to make affordability complaints, hopefully someone more experienced can advise. The Elvo debt is also suspiciously punative.

In the meantime you could look at a DMP. If you stop paying all unsecured debt you could save a considerable fighting fund quite quickly. Play hardball and only make small payments once you get defaults with the aim of saving up and making full and final settlements in a few years. You do have a large income, however, so you will have to refuse to supply them with a SOA for a while.

TG

IRunFar

Thank you so much @tigergambit - super helpful! I've never heard of affordability complaints - so if anyone has any more intel on how that might help, I'd be grateful. 

I don't want to take advantage of your kindness, but may I just check what this all means in terms of next steps please. Is there a step-by-step process I should follow, like a checklist that people have used to navigate things: 

1. Should I just stop making the payments and wait for my creditors to reach out, or would it be better to alert them beforehand? I have a hunch that Evlo will be super persistent! I once cancelled my direct debit with them to move it to another bank account, and they called, texted and emailed me within the hour to ask why I'd stopped the payment. WILD! 

2. Should I send them a small payment instead of the usual amount right away, or do I have to talk with them about what that the amount will be first? Perhaps there's a template letter somewhere that I can use? 

3. I assume it's OK to set-up my own DMP rather than through one of the Debt Charities?  

4. What is likely to happen once I've defaulted and what do I need to do once that all kicks in? 

Thank you again everyone - it's wonderful to have this resource to seek help. 

Grumpelstiltskin

A quick answer.

Affordability complains, information here.

How to get refunds from catalogues and credit cards · Debt Camel

1) No never phone creditors, just don't tell them. OK you may be bombarded with calls, just block all their numbers, ignore E Mails and texts but open any letters you get through snail mail.

2)  cancel all payments and don't talk to them, don't pay them anything unless one is a credit union, they can be a problem.

3)   Yes

4) Defaults won't happen overnight, we will give you information of how to handle them.

You need to open a basic bank account with a banking group you don't owe money to and manually transfer all vital direct debits to it, don't use the banking switch service.

Then save as much as possible towards emergency fund and possible settlements.

tigergambit

Hey @IRunFar,

Wait for @sourcrates or @fatbelly to advise on affordability.

Read the sticky post on how to get out of debt which you have already covered much of:
https://forums.moneysavingexpert.com/discussion/6607343/looking-for-a-little-guidance-to-start-my-journey-towards-becoming-debt-free

This is a long game and time is to your advantage. First thing you need to do is get a basic current account with a banking group where you have no debt. Get your salaries and essential payments set up on this. Do not use the switch service.

So in answer to your questions:

1. Stop payments and do not respond to contact. Block phone numbers. Evlo will be jumpy as it's a larger amount and a very good deal for them. If your cash cow wandered off you'd go looking for it pdq!

2. NO! NO PAYMENTS, NO CONTACT! You are a decent human and of course you want to explain. Just don't. These people are NOT decent humans. You need to bear this in mind!

3. Totally. You have much more control this way.

4. Once defaulted they may sell on your debt (this is good). Either the original creditors or the debt collection agency will contact you to set up a payment plan. It is at this point that you can respond, although no paying towards debts where you have a complaint or query ongoing until it is resolved to your satisfaction. You tell them what you will pay. No negotiation!

Everyone has their own way of playing this game, but the creditors have to stick to set rules, which is hugely to your advantage. My method differs from that of others, you just have to work out something you are happy with. I played reasonably nice and managed to get F&F settlements on much of my debt at around 23%. A couple of creditors wouldn't play so they get £1 a month forever. I look on this as a cheap interest free loan.

NB. Do not share your SOA as it stands with creditors. You are showing far too much surplus.

ManyWays

Oodle..........................10755.....267.......18.7
Is this car finance for a car you currently have? If so its a secured debt and you have to keep paying this in full if you want to keep the car. This will reduce the amount available to be divided between your other creditors.

Elvo...........................10000.....453.......52.9
I assume that is a typo for Evlo, the rebrand of Everyday loans, new name, same horribly expensive loans

A lot of your lending is so expensive, you know you are in way too deep when Aqua is looking like one of your cheaper debts! And even Aqua has given you two cards   

Affordability complaints and defaults followed by affordable payments looks like the way to go, not butchering your pension to pay these.  

fatbelly

What's the story with the car?

You have put a large figure for petrol, which leads me to think you do a high mileage in something, but nothing in the asset section.

Oodles seems to do car finance but could be hp (so not your car and priority payment) or personal loan ( your car, nonpriority payment). We -that is you and us- need to be sure which one it is

All your lenders are from the bottom end and it looks like this all became unaffordable some time ago, so affordability complaints are definitely the way forward

IRunFar

Hi everyone! Thank you all so, so much for your advice and support so far. I think I’m beginning to understand my options better now - as scary as they are! 

Oodle is a personal loan which I took to buy the car - so not HP, and the petrol costs are high because my husband is a peripatetic tutor who travels a lot between schools. It will come down in the school holidays of course.  I guess I hadn’t really thought of the car as an asset as we borrowed to buy it.

I’ll do all the reading around affordability complaints - thank you for flagging this as an option to seriously consider.

Is it really just OK to ignore these creditors? That’s going to be one of hardest things I feel.

Oh, and can anyone recommend a good basic bank account please? Huge thanks again. 

Grumpelstiltskin

Does your husband get a mileage allowance for his car?

Yes it is OK to ignore your creditors. OK you will get phone calls - block all the numbers, texts and E Mails - ignore. Letters through the post you should open and read.

Best basic account, it depends which banking groups you owe money to, you must avoid any group you owe money to.