I’m £50k in debt Scotland

kimwp · 27 May at 8:11AM

Remortgaging to put the debt on your mortgage converts unsecured debt to secured debt, increasing the risk of losing your house if you cannot pay, generally considered a bad idea.

Shuffling money onto 0% interest cards by spending on them is also not advised for someone who has had issues managing debt. It is a valid strategy for someone who has a good handle on their finances, but is a complicated strategy.

Quixoticity11 · 27 May at 9:27AM

I realise it’s not really what you’re asking, but is there scope for you to take on an extra part-time job? If you can earn an extra few hundred a month it will make all the difference.

Quixoticity11 · 27 May at 9:31AM

Also, you’re on a good salary, are you paying into a pension? Could you opt out of that for a short time until you’ve paid one or two of these debts off?
Retirement planning is *so* important and I really really must stress that if you do this, you should start paying into you pension again the moment your debt is at a manageable level.

FluffyBabyPenguin · 27 May at 10:44AM

I'd echo the poster who suggested a part time job. A shift or two each week somewhere in addition to your main job, would be better in the long run than refinancing your debt or struggling to eat.

Are you decent enough at cooking and feeding yourself well for cheap? The old-style money-saving board on here is great if you need low cost meal ideas, and other ways of saving money.

kimwp · 27 May at 11:31AM

chrisjvc1 said:

[font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]

Household Information[/b]
Number of adults in household........... 1
Number of children in household......... 0
Number of cars owned.................... 1[b]

Monthly Income Details[/b]
Monthly income after tax................ 3049
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0[b]
Total monthly income.................... 3049[/b][b]

Monthly Expense Details[/b]
Mortgage................................ 1005
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 145
Electricity............................. 75
Gas..................................... 75
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 0
Mobile phone............................ 12
TV Licence.............................. 15
Satellite/Cable TV...................... 40
Internet Services....................... 25
Groceries etc. ......................... 280
Clothing................................ 0
Petrol/diesel........................... 200
Road tax................................ 0
Car Insurance........................... 45
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 150
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 23
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 10
Haircuts................................ 20
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 0[b]
Total monthly expenses.................. 2120[/b]
[b]

Assets[/b]
Cash.................................... 0
House value (Gross)..................... 163000
Shares and bonds........................ 0
Car(s).................................. 7000
Other assets............................ 0[b]
Total Assets............................ 170000[/b]
[b]

Secured & HP Debts[/b]
Description....................Debt......Monthly...APR
Mortgage...................... 144000...(1005).....5.1[b]
Total secured & HP debts...... 144000....-.........- [/b]

[b]Unsecured Debts[/b]
Description....................Debt......Monthly...APR
Sainsburys.....................4626......104.......0
Natwest........................2934......75........0
Bank of Scotland ..............3120......78........0
Zopa...........................19000.....415.......11.2
Nationwide.....................8523......189.......8
Halifax .......................6327......189.......7.8
Halifax........................287.......5.........0
Nmba...........................2028......50........0
Lloyds.........................1639......42........0
Natiinwide.....................3141......60........0[b]
Total unsecured debts..........51625.....1207......- [/b]

[b]
Monthly Budget Summary[/b]
Total monthly income.................... 3,049
Expenses (including HP & secured debts). 2,120
Available for debt repayments........... 929
Monthly UNsecured debt repayments....... 1,207[b]
Amount short for making debt repayments. -278[/b]

[b]Personal Balance Sheet Summary[/b]
Total assets (things you own)........... 170,000
Total HP & Secured debt................. -144,000
Total Unsecured debt.................... -51,625[b]
Net Assets.............................. -25,625[/b]

[i]Created using the SOA calculator at www.LemonFool.co.uk.
Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]

ok, so there are some things you can cut back on (groceries, tv package and possibly energy bills), but the savings will be fairly small and there are some things you haven't got in your budget, but probably need (car maintenance, road tax, entertainment for the kids (assuming the £150 is child maintenance), clothing).

So if your SOA is correct, you are significantly short of making the minimum payments. This means you are not (short of a significant cash injection like an inheritance or extra income from a pay rise, another job or a lodger etc) going to be able to get out of this debt without something like a DMP (debt management plan) or IVA.

First step is to open a basic bank account (no overdraft, no fees or requirements) with a bank unconnected to your creditors and manually (without using the automated CASS switching service) move your salary and high priority bills (mortgage, council tax, utilities etc) over. Cancel the direct debits on your old account, ignore the creditors attempts to contact you (tell them to only contact you in writing if you don't want calls) and let the debt default while you build up an emergency fund (as you won't have access to credit for a while).

If DMP, then when the debts default, you can contact them to pay small amounts until your emergency fund is sufficient and you can afford to pay more to the debts.

RAS · 27 May at 12:14PM

chrisjvc1 said:

DankVielen said:

chrisjvc1 said:

Hi folks, I know this is all my own doing but after a difficult divorce I bought a small house that needed some work. To cut a long story short I now have 8 credit cards, with £17k of debt, most of which is on 0% for a year. I have 3 loans, one with 8k left, one with 7k left and one with 19k left. I earn £50k a year, I can just cover all my payments but have about £100 spare for food……I don’t want to loose my house but either I sell up or take out a 7 year loan for £29k which will mean I can pay off all my credit cards and 2 loans, this will take my payments for all that from £870 a month to £538 giving me some money to live on. Any advice please

First of all, well done for recognising you have a problem and coming to get help, this is not always easy.

Before deciding on a debt solution I think there needs to be some analysis of where the money went.

I have had family and friends in London buy a flat to add a bedroom, it was the only way they could afford to get to a 2 bed flat to start a family. They both used up to 6 credit cards each to fund the development of the property and that was after they had saved up around £40k and cashed in ISA's etc. When one went to remortgage to pay off all this debt (as property value was not £250k higher) the bank refused the mortgage because apparently they do not like to use a mortgage for this purpose. 6 months later they went to a broker who got them a deal to remortgage and they paid off every penny of debt, even the zero percent.

House value (Gross)..................... 163000
Mortgage....................................... 144000

Therefore if your debt was 90% spent on the property and the property now has a higher value then I would suggest a remortgage, even if you have to pay above the going rate. However, unless you were quoting the old house valuation then it seems as if this was a money pit and you made poor decisions on developers.

If we consider that the

Amount short for making debt repayments. -278

and you do only have around £20,000 of equity then the simple solution is to remortgage the house, pay off the Zopa thus reducing your outgoings by £415

Zopa...........................19000.....415.......11.2

This would give you an extra £137 a month to attack the Nationwide and Halifax

Nationwide.................8523......189.......8
Halifax .......................6327......189.......7.8

If now that you have done up the house worth more you could add and extra £15k and pay off the Nationwide and Halifax too.

This would release a further £398 a month so an extra £530 a month to pare down your zero percent debt.

If you use can remortgage and then use this £530 you could have the whole debt paid off in 18 months

If you had the dates when the zero rate expires it would be possible to reorder the cards so that you pay off the ones that have debt expiring first.

If remortgage is NOT and option then let's work through other options, but first consider the ROOT CAUSE of the debt.

If the Zopa debt for example was to already consolidate previous overspending then I think you need to address that problem. There is no judgement here, many people have gambling habits, paying of an Ex's debt and so on. What you need to know is whether the root cause could happen again?

Normally the way I would approach an SOA like yours is on how much disposable income you have without debt and yours seems pretty healthy.

So the next question is whether you mind trashing your credit record for 6 years to get a reduced rate on this debt?

If the answer to that is that you want to preserve your credit record then there are two things to check,

1. Is there any discount for early repayment of any loan?
2. How much credit do you have on the zero percent cards and
3, When do the zero rate expire.

If there is some capacity on the zero percent cards and there is a discount for early repayment then it makes sense to use that capacity to reduce the debts that are costing you the most. You do this by putting your monthly spending of bills & food on the zero percent card and then each day move what you spent on the zero card to a savings account and then pay those accumulated amounts from the savings to the debt with the highest interest rate (if you benefit from early repayment).

The three that stand out are

Zopa...........................19000......415.......11.2
Nationwide...................8523......189.........8
Halifax .........................6327......189........7.8

If Zopa is a fixed rate loan and does not cost less if you pay off early then Nationwide and/or Halifax would be where you spend it, assuming they too reduce.

If neither reduce then still use up your credit limit but use the money to pay off the zero percent that ends earliest. This will reduce the risk of you having to pay 24% when an offer expires and you are deemed over extended and can't transfer to another zero percent card.

On personal spending these are the areas to question:

Water rates............................... 0 ----> This should be payable
Mobile phone.......................... 12----> Switch to Lebara £3 month deal
TV Licence.............................. 15 ----> £0 Dump BBC & Live TV
Satellite/Cable TV.................... 40 ---> Dump all pay TV
Groceries etc. ....................... 280 ----> Try to cut this by 20% minimum
Petrol/diesel........................... 200 ---->
Road tax.................................... 0 ----> Is this another omission, how can you spend £200 on petrol but £0 on this?
Haircuts................................... 20 ----> Get a trimmer for £18 at Tesco

If you were going to DMP your debt then you might take a different approach and pare down your mortgage with any spare cash but that would be a bit of a dodgy thing to do. You are not in that desperate a state yet.

DMP will trash your credit record but you should be able to remortgage at variable rate with existing lender when the promotion rate expires (or that may have happened). If your mortgage discount has reverted it would be a good reason to remortgage as rates are coming down.

thank you for all the fantastic advise. I’m tied to year 3 of a 5 year fixed mortgage deal, I doubt that remortgaging is an option. You were correct to assume that most of the money went on the house. And as I am currently living beyond my means I am consuming more on my credit cards. I have managed to move all the card balances around this month to start new zero percent deals most at 12 months. I was focused on how to reduce my outgoings and payments before I sink. Consolidating debts and having one loan was the only way I saw to do this. I only have about twenty years until retirement so I’m limited what I can achieve. I was also worried about raising all the debt on my zero percent cards to pay off loans as this will increase my payments and also it’s only for 12 months. I keep getting messages from clear score saying my credit rating might get damaged if I go above 40 percent utilisation. I potentially have around £27000 I could utilise further at 0. Percent.

It’s difficult to know what to do next.

Re-mortgaging is not a good idea. Fail to pay consumer debt and it leaves your credit record in 6 years. Fail to pay the mortgage and you face losing the house you spent so much time doing up.

fatbelly · 27 May at 2:07PM

Hopefully no-one would grant a remortgage in that situation.

However, there are still some unscrupulous firms who may give a secured loan and the op should go nowhere near them

chrisjvc1 · 27 May at 3:13PM

Thank you all for your advice. Lots of different approaches are recommended so I guess Inshould go get some help from a citizens advice.

RAS · 27 May at 3:38PM

If you decide to go to CAB, make sure that branch has debt advisors and check which days they are available.

enthusiasticsaver · 27 May at 6:01PM

First of all I would not recommend consolidating and definitely not a remortgage.

Secondly if you are still using credit to live off you are making matters worse and that needs to stop.

Your options are.
Increasing income by a second job or taking in a lodger or selling stuff.
A DMP which would mean you defaulting and setting up an affordable monthly repayment to be shared out between your creditors.

I’m £50k in debt Scotland

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