debt is crippling me

Ragdoll_kat74

Hi all I am new here and and ashamed that I have managed to get myself into 70k of debt, mainly trying to consolidate debts. These are the things Iv tried to sort it 
take a bigger loan out to cover half of it. 

Tried to use some equity on house to pay at least half of debt but I have been told I have to wait until Iv had at least two loans for at least two years before they can consider again .
I have around 7k to play around with at present so I’m stuck with what to pay. I have anxiety about not having savings this is my main issue I’m scared of having no emergency fund. 
other options use my pension as I have two but as I’m under 55 I will lose a lot of it to tax . 

I’m thinking of not paying my pension for the next 12 months and use that to pay debt off quicker. I earn 46500 and I have basically little left . Thank you for your advice in advance. 

Mark_d

You earn a reasonable salary so if you put all your cash into paying off debts, then things will gradually get better.  Why do you need 7k in savings?  Putting 5k of that into paying off an expensive debt will make a noticeable (although small) dent in your debt repayments.

kimwp

If you are under 55, I don't think you have the option of using your pensions.

Before you do anything, fill out your SOA (link in my signature). This needs to be an accurate record of your income and outgoings, so best to use your bank statement from the last 3-12 months (if not using the full 12 months, remember to add your annual spends divided by 12)

fatbelly

Until you've had proper advice do not try

Consolidating
Using your pension
Using your equity

You will just make a bad situation worse

Follow kim's suggestion above

sourcrates

As you have discovered, consolidating debts does not work, and using equity from your home is just as bad an idea, also you can`t touch your pensions till you are 55, anyone who tells you otherwise is a scammer.

Let`s see that SOA, and get you set on the right track.

Andyjflet

As others said, you cant borrow your way out of debt, consolidating is just kicking the can down the road. use a plan to tackle the debts one by one and live frugally until you're debt free. 

QrizB

sourcrates said:

...also you can`t touch your pensions till you are 55, anyone who tells you otherwise is a scammer.

and

kimwp said:

If you are under 55, I don't think you have the option of using your pensions.

You're correct but OP wasn't suggesting that they take money out of their pension, just that they stop making contributions for a period.

I agree that they need to complete a full SoA before doing anything else.

sourcrates

QrizB said:

sourcrates said:

...also you can`t touch your pensions till you are 55, anyone who tells you otherwise is a scammer.

and

kimwp said:

If you are under 55, I don't think you have the option of using your pensions.

You're correct but OP wasn't suggesting that they take money out of their pension, just that they stop making contributions for a period.

I agree that they need to complete a full SoA before doing anything else.

OP states:

"other options use my pension as I have two but as I’m under 55 I will lose a lot of it to tax" . 

I`d say he had it in mind.

Ragdoll_kat74

I can take my pension once I reach 50 as I have special status I have already spoke to my pension service . Ideally don’t want to do this 

DankVielen

Ragdoll_kat74 said:

Hi all I am new here and and ashamed that I have managed to get myself into 70k of debt, mainly trying to consolidate debts. These are the things Iv tried to sort it 
take a bigger loan out to cover half of it. 

Tried to use some equity on house to pay at least half of debt but I have been told I have to wait until Iv had at least two loans for at least two years before they can consider again .
I have around 7k to play around with at present so I’m stuck with what to pay. I have anxiety about not having savings this is my main issue I’m scared of having no emergency fund. 
other options use my pension as I have two but as I’m under 55 I will lose a lot of it to tax . 

I’m thinking of not paying my pension for the next 12 months and use that to pay debt off quicker. I earn 46500 and I have basically little left . Thank you for your advice in advance. 

PLEASE do not feel bad and definitely not ashamed, we have all been through what you are going through, I owed around £90k and never repaid a penny, despite paying a fortune in interest until I got some good advice.

The first thing you need to know is that this is not your fault, the lenders want to put you in a place where you can afford to service the debt but not pay it off.  They do this by increasing credit limits, providing zero percent interest rates and irresponsible lending.  This encourages you to live beyond your means, it may be a nice holiday that you plan to pay off over a year or two, or medical treatment, a new car sooner than what was needed vs wanted.

You really need to post up an SOA so people can give you explicit advice to your situation, the link below puts all of your financial information together in a structured way, you then the output back here in this thread.

https://www.lemonfool.co.uk/financecalculators/soa.php

What might help you in the solutions offered is reevaluating your attitude to money, for example if I could print monopoly game money that you could spend anywhere but you had to pay it back in real money, would you think that was OK if you yourself could not print monopoly money?

If you have £7k in savings that is real money you can use it to throw at a particular debt, which might reduce your outgoings but really won't put out the fire.

At the same time I would not throw £7k of real money at your debt, keep it for emergencies.

The Self Managed Debt Management Plan (DMP)  is the usual way to go for unsecured debt, basically you stop paying all unsecured debt and wait for each debt to formally default.  This involves them sending you a letter saying they have terminated the agreement, no more interest will be charged and they have sold the debt to a Debt Consolidation Company (DCC).  That Debt Consolidator will appoint a Debt Management Company (DMC) who will in turn appoint Debt Collectors who will get 3 to 6 months to get you to pay something and then be sacked with a new Debt Collector being appointed and so it goes on.  Each Debt Collector has a different method, uses similar letters to scare you but you do not engage unless all or most debts have defaulted and you are starting to get offers that are substantial.  I got 60% discount offers but they took too long so I ended up paying nothing.

You might be thinking "WHAT 60% OFF are you kidding", well no I am not kidding, they can create money on their computers, they lend it to you and pay 3% to the central bank as a way to regulate their own solvency.  When they sell the debt it is at as little as 5p to 12p in the pound, but it allows them to take that £70k off their books and lend it to someone else.  So their liquidity ratio improves, meanwhile the organisation buying the debt is entitled to seek the full value of the debt at the time it was sold to them, but only for certain periods between 6 and 12 years.  They have no real powers of forcing you to pay them, hence they make offers once they face this reality. 

The 6 to 12 year clock resets if you acknowledge or pay towards a debt, hence you need to go off radar and DO NOT ENGAGE unless you have a decent offer or a REAL letter of claim (letter before action) many of these are faked so take advice on here as and when.

The DMP first steps has further information

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

The SOA should list both secured and unsecured debt.

A DMP will trash your credit record for 6 years but to be honest you are close to that anyway.

One thing that I think is important for you going forward is to figure out the cause and reason for your debt so you can prevent it happening all over again.  This could be living beyond your means with things you simply can't afford, you might have a gambling problem or you might be a compulsive shopper for things you don't need.  These are all just examples of how the core issue presents itself, for the actual reason you might need to dig deeper and seek professional help.  Often there is a depression and anxiety at the root of it, for example buying nice things can make one feel safe or secure.  I know this is bizarre as the very action made them less secure but a friend of mine had this issue and after a lot of therapy this was the root of it. I am sure that the lenders know this, they know how to use ads and internet profiling to appeal to us. 

The important thing for now is that you have recognised you have a problem and you have taken the first steps. Well Done for that!

Ragdoll_kat74

wow .. I didn’t know any of this, I am ashamed and embarrassed, I look at my friends and colleagues who always talk about how they have paid their mortgage go on luxury holidays and here’s me in this bloody mess . I think I know the root cause of this I had cancer when I was 35 and I had a pay out but because I thought I was going to die I made sure I made memories with my kids and  updated all my house, when the money had gone and I am surviving I have tried to build this money back up, I used credit cards instead of money I had in bank cos I was scared to have no emergency fund . I had psychological therapy but it appears it’s not really helped. ie I’ll post my SOA later