I’m £50k in debt Scotland

fatbelly

chrisjvc1 said:

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

Best of luck. Let us know what they say, if you can get through to them

(I work for CA)

kimwp

chrisjvc1 said:

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

I think it's worth your time to go back through the thread and look at how many "votes" there are for each solution, perhaps also consider the length of time each poster has been contributing to the board.

If you want help with the likely pros and cons of an IVA Vs a dmp, just ask.

chrisjvc1

I may sound thick, but why not just take a consolidation loan and have one payment instead of 7. I know I’ll pay more interest but at least I’ll be £400 a month better off 

kimwp

chrisjvc1 said:

I may sound thick, but why not just take a consolidation loan and have one payment instead of 7. I know I’ll pay more interest but at least I’ll be £400 a month better off 

Ask any questions you need to. 

The experience on this board is that 99 times out of 100, consolidation loans don't work to get people out of debt and actually lead to people being in more debt, possibly because they lead to feeling like the issue is solved, so don't change the behaviours that led to the debt in the first place. The comment you made about having one payment instead of seven, paying more interest, but at least being £400 a month better off strongly suggests that you will be one of these people. They can work as an effective tool if used to transfer higher interest debt to lower interest debt alongside any 0% credit card deals, but only if the underlying behaviours change. 

But it may not be an option anyway - you are already unable to make your minimum payments and when assessing you for a new loan, a bank has to assume that it is extra debt to the debt you already have (as you may not use it to pay off existing debts or run up your credit card debt again). 

chrisjvc1

Does a dmp mean I could lose my house?

kimwp

chrisjvc1 said:

Does a snot mean I could lose my house?

Sorry Chris, I think you've got a typo and I'm not sure what you meant to write.

chrisjvc1

Oops that should have said dmp. 

RAS

As per the earliest messages in your thread, a DMP will not affect your house as long as you keep up to date on the payments.

You will need to renew your fix with your existing supplier because that does not require a credit check. You just go in a few months ahead of time, select the best option and sign up. Some people here have done it twice.

kimwp

That makes more sense

As RAS says, keep up your mortgage payments, house insurance (it will be a condition of your mortgage and also just a very good idea), council tax, any HMRC payments, utilities etc and your house should be unaffected.


To be completely clear, if you don't pay unsecured debt, it is possible that you could lose your house. But for that to happen, that the owner of an unsecured debt would have to take you to court and get a CCJ, then take you to court to get an interim charging order, then a charging order against your house, then an order of sale. It's just not worth it for them. The possibility is so small that it should be ignored and paying them what you can reasonably afford after the debts have defaulted (which they would have to wait for before they took action - which they won't) should avert even this slightest possibility. Soon after the debt defaults, they will write it off and sell it to a debt collection agency for a fraction of what you owe, alongside many other people's defaulted debts. Then the debt collection agency will be happy as long as they make a profit or not too much of a loss, so you'll keep paying what you can afford for a couple of years and start to see if they will accept full and final offers to write the debt off.

DankVielen

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.

It seems some did not appreciate my advice, it did have some caveats, it started with

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

For example if you have a gambling problem then obviously securing your debt on your house would be nuts.

However, if the debt was all accrued on fixing up the property (as implied in your OP) then it would seem fit and proper to move development costs to the mortgage, if you had got a mortgage with an extra £50k to do it up then I see no difference.

I also said

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

If you are going to be doing other develop and sell on property then trashing your credit would not be a good idea.

I also clarified for a 3rd time

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.

You have not answered this or any of the questions so hard to give further advice which may be the same as others about getting a DMP

chrisjvc1 said:

It’s difficult to know what to do next. 

I do not think you would get better advice in a CAB, just perhaps a reality check.

I have not been here very long, but I have come to truly respect the regulars posting on this section of the forum, their experience far outweighs mine.

People have put in a lot of effort and you comment back with short answers which suggests to me that you may not quite be ready to be open about how you got into this position, which leads me to concur with others that DMP may be the best route for you.