Unable to pay back Debt

babayaga96

Hello,

I am a 28 year old working professional with at least £25K through credit cards, car loan and other debts like PayPal credit, Very, Novuno etc sitting on my head. I have been making minimum payments for a year now and now unable to make those as well due to changes with my salary compensations. 

I am worried about how to get out of this debt as it causing me excess stress and stupid thoughts. The issue is I am on a skilled worker visa as well and I am not sure if this is going to affect my visa. I always wanted to payback my debt but I fell into this loop of using credit cards for building good credit history and ended up over using excessively. Bad management of finances as I was getting high commissions at work which I assumed was permanently but I was clearly wrong as they have fallen down. 

I need to help through advice as to what is the best course of action.

kimwp

Hiya! First step is to fill in a statement of affairs (SOA), link in my signature. It needs to be an accurate account of your income and expenses, so best to use your bank account statements over the last 3-12 months to calculate the numbers.

fatbelly

If the car loan is just a personal loan and not hire purchase/conditional sale ( you will need to check your agreement) then your debts are non-priority and you can stop paying, ahead of what is probably going to be a debt management plan.

See Kim's helpful thread

https://forums.moneysavingexpert.com/discussion/6496941/in-debt-and-wannabe-debt-free-first-steps-to-take-are-here-please-read-then-ask-questions

babayaga96

@kimwp @fatbelly My income varies every month, so should I only consider my standard fixed base salary that I get every month?

babayaga96

Summary

Monthly Budget Summary	Amount(£)
Total monthly income	2,000
Monthly expenses (incl. HP & secured loans)	2,117.5
Available for debt repayments	-117.5
UNsecured debt repayments	880.91
Amount short for making debt repayments	-998.41

Personal Balance Sheet Summary	Amount(£)
Total Assets (things you own)	6,000
Total Secured & HP Debt	-14,776.5
Total Unsecured Debt	-16,808.23
Net Assets	-25,584.73

Income, Expense, Debt & Asset Details

Income	Amount(£)
Monthly income after tax	2000
Partners monthly income	0
Benefits	0
Other income	0
Total monthly income	2000

Expenses	Amount(£)
Mortgage	0
Secured/HP loan payments	289.5
Rent	800
Management charge (leasehold property)	0
Council tax	0
Electricity	0
Gas	0
Oil	0
Water Rates	0
Telephone (land line)	0
Mobile phone	50
TV Licence	0
Satellite/Cable TV	0
Internet services	30
Groceries etc.	250
Clothing	50
Petrol/diesel	200
Road tax	16
Car Insurance	292
Car maintenance (including MOT)	0
Car Parking	0
Other travel	40
Childcare/nursery	0
Other child related expenses	0
Medical (prescriptions, dentists, opticians etc.)	30
Pet Insurance/Vet bills	0
Buildings Insurance	0
Contents Insurance	0
Life Assurance	0
Other Insurance	20
Presents (birthday, christmas etc.)	0
Haircuts	0
Entertainment	50
Holiday	0
Emergency Fund	0
Total monthly expenses	2117.5

Secured & HP Debt Description	Debt(£)	Monthly(£)	APR(%)
Mortgage	0	(0)	0
Hire Purchase (HP) Debt	14776.5	(289.5)	26.9
Secured & HP Debt totals	14776.5	-	-

Unsecured Debt Description	Debt(£)	Monthly(£)	APR(%)
Santander	4794.96	276.9	22.9
Natwest	4746.74	182.1	12.9
HSBC	1496.5	80.15	25.9
SKY	1560	65	0
Very	2500	175	44.9
Novuna	642.6	37.8	0
Novuna	104	26.1	0
PayPal	963.43	37.86	25.9
Unsecured Debt totals	16808.23	880.91	-

Asset Description	Value (£)
Cash	0
House Value (Gross)	0
Shares and bonds	0
Car(s)	6000
Other assets (e.g. endowments, jewellery etc)	0
Total Assets	6000

Grumpelstiltskin

No council tax, gas, electric, contents insurance?

Secured debt?

A bit more detail please.

kimwp

hiya, a few initial thoughts/questions:

1. is £2000 your guaranteed salary, your usual minimum or does it include commission? What is your commission usually?
2. Are your secured loan payments for your car? Have you looked into whether you can return the car? Though the issue with this is that your credit record probably means you can't get another, cheaper one.
3. does your rent include all the bills?
4. are you watching any bbc tv or streaming any live tv? If so you may need a tv license as a lodger - or better given your finance, just make sure you don't watch iplayer or live stream tv.
5. your mobile is high, make sure to note in your calendar when you are out of contract and switch to a sim only at under £10.
6. groceries for one person are higher than they could be -you could cut this in half by bulk cooking, eating rice, beans and cheap veg for your lunches etc. It potentially sounds a bit miserable, but a lot of people around the world do eat this way when they don't have the money to eat more expensively.
7. clothes - very few people need to buy more clothes - only buy anything absolutely necessary and look in charity shops, they have loads of nice stuff.
8. Is your car insurance really £292 a month or is that for the whole year?
9. You might want to think about contents insurance 
10. Consider whether you need the £50 entertainment, are there any free things you could do instead? Or maybe you put some of your commission money aside for your entertainment?

The above only cuts back your non-debt outgoings to match your £2k income (given that there is no allowance for holidays (presumably you fly to see family occasionally?), haircuts, presents and you should really also be saving every month as well - into an emergency fund and then generally so you can buy things outright rather than taking out expensive credit. 

I'm confused as to how you are not already defaulting on your debts, seeing as you don't appear to have any spare money to pay them? 

fatbelly

It looks like the car is on HP. Did you check? You said it was a loan earlier.

So not only is it costing you £290 per month at a high APR, it is costing over £500 in running costs, with no budget for maintenance.

Add that to 800 rent and 250 groceries, and there is little left for essential payments, let alone 900 for servicing nonpriority debts.

So, when in a hole you stop digging. You need to either (quite soon) stop the payments to nonpriority debts or voluntarily terminate the agreement on the car and stop using it.

As Grump points out we don't have the full story so advice could change.

QrizB

babayaga96 said:

kimwp fatbelly My income varies every month, so should I only consider my standard fixed base salary that I get every month?

£2000 a month is barely more than minimum wage (assuming a full-time job) which seems rather low for a professional on a skilled worker visa.

What makes up the variable part of your income - commission, tips, profit sharing? Typically how much is this (I realise it might be complicated).

On your base wage, you're spending £800 a month on accommodation and another ~£800 a month on transport which leaves £400 a month for everything else.

RAS

You are on a low salary for someone on a skilled worker visa; are you working in one of the professions like health care where lower rates are accepted? No need to tell us which sector.

When does your visa run out, as you'll need savings to pay the renewal/extension fees and health services surcharge?

You are also spending a quarter of your income on the car. What's the deal? Is it essential for your job? And you are not paying CT or utilities?

To start to balance you income and expenditure, you can only afford entertainment and clothes in the month after you actually receive money for commission. It might help if you could add up how much you received in the last three or 4 months and average that, and report back.

babayaga96

@kimwp @fatbelly @QrizB @Grumpelstiltskin


I do make commission every month but unfortunately due to the nature of the market, the business is down and the incentives have come down. After Tax you can consider I usually get around £2.5K - £2.7K every month. 

I understand this pay is low for a Skilled Worker Visa but I have been only working since 2-3 years and the base pay is usually a bit low in the Sales field as there is scope for incentives. 

2) I can not return my car without paying some more money on top. I am looking to sell this car and buy a cheaper car to be honest but no clue how to make that possible now. Not having a car is not an option as my job demands I have a car. 

3) Yes, my rent includes most bills. 
4) I do not watch any live TV etc, No Netflix or any OTT subscriptions. Cancelled all of them.
5) Yes, I am in talks with them as speak to get it down to £25 for 2 SIMS.
6) Yes, I am cutting down my grocery costs as well. I went from £400 to £250 and I aim to go further down as well. 
7) In all reality I do not shop footwear and clothes frequently. I shop once in 6 Months when there is a sale. 
8) Yes, it is monthly as I am a first time driver and that was the least quote I could get in London.
10) The £50 entertainment I put are for in case. I have stopped doing everything that is fun just because I got no money. I stopped smoking, drinking, going to the cinemas etc.

Another important detail: I am providing financial support to my single mother who lives abroad. To get this debt out of the way, I took some loan back home and tried paying here which even after I had done, did not work due to mismanagement, interest here on the cards as well as back home now. 

I have made really bad decisions in life due to lack of awareness and my own foolishness. I am learning life the hard way I am getting there.

Unfortunately, due to all this and also the fact I have put myself in a helpless situation , this is taking a toll my personal mental peace. I want to get out of this mess. I have managed somehow to make minimum payments etc until now but now I need to accept the reality and get a solution together.