More debt to clear debt

John1298

Hi everyone,

I have a situation.  I am currently in around 50k of debt.  Most of it I am paying a small token gesture, and interest is frozen.
However, 10k of it I am paying £700 a month, I can't get it lower (court ordered and family) and it is a chain around my neck, and I can't think of anything else. I am working 7 days a week, often 7am-9pm.  It also means I have zero left end of month.
The kicker is, in April I will have another £230 to pay monthly (new council tax bill).  

I have the option of taking on £10k more debt over 10 years, this would clear the £700 a month, and only cost me £170 a month.   This would free up £530 a month, which would be some towards clearing the other debt and the council tax etc, with even the possibility of saving a bit as I have no savings and no way to save.  However, it will of course cost me extra long term, but I could overpay to limit that, as my earning potential is increasing.

My gut feeling (and after playing with calcs) is to take the £10k, pay off the urgent debt and use the difference to get myself back on an even keel.

But this would increase my debt short term.

What would you do?

itsthelittlethings

Can you do an SOA? It’s easier to comment when seeing the full picture. It does sound like a good move but you would need the full picture really.

itsthelittlethings

For a start are you on some kind of debt repayment plan and if so are you allowed to take out more debt?

John1298

itsthelittlethings said:

Can you do an SOA? It’s easier to comment when seeing the full picture. It does sound like a good move but you would need the full picture really.

I can do yes, I have all the figures

John1298

itsthelittlethings said:

For a start are you on some kind of debt repayment plan and if so are you allowed to take out more debt?

 Ok, so no formal plan other than approaching each company and asking them to accept £1 each.  Stepchange suggested this.

The new loan would come in the form of a secured loan on the mortgage, and I have plenty of equity.  The loan would be absolutely affordable too, so I wouldn't be worried about any defaulting

itsthelittlethings

How much longer do you have to pay the £700 a month for? It should be around a year and a half if my calculations are right.

John1298

itsthelittlethings said:

How much longer do you have to pay the £700 a month for? It should be around a year and a half if my calculations are right.

Yes, around a year and a half is correct.  I think I may be able to get that down to maybe a year if I really pushed it, but that would be insane and would mean taking on more work

itsthelittlethings

They do generally strongly advise against turning unsecured debt into secured debt but if it’s court ordered it’s a bit different to ordinary unsecured debt.

John1298

itsthelittlethings said:

They do generally strongly advise against turning unsecured debt into secured debt but if it’s court ordered it’s a bit different to ordinary unsecured debt.

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

Household Information[/b]

Number of adults in household........... 2

Number of children in household......... 1

Number of cars owned.................... 1[b]

Monthly Income Details[/b]

Monthly income after tax................ 2300

Partners monthly income after tax....... 0

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

Other income............................ 0[b]

Total monthly income.................... 2300[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 1167

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

Rent.................................... 0

Management charge (leasehold property).. 0

Council tax............................. 220

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

Gas..................................... 80

Oil..................................... 0

Water rates............................. 0

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

Mobile phone............................ 35

TV Licence.............................. 20

Satellite/Cable TV...................... 25

Internet Services....................... 33

Groceries etc. ......................... 0

Clothing................................ 0

Petrol/diesel........................... 200

Road tax................................ 33

Car Insurance........................... 117

Car maintenance (including MOT)......... 0

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

Other travel............................ 0

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

Other child related expenses............ 0

Medical (prescriptions, dentist etc).... 0

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

Buildings insurance..................... 20

Contents insurance...................... 0

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

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

Presents (birthday, christmas etc)...... 0

Haircuts................................ 0

Entertainment........................... 0

Holiday................................. 0

Emergency fund.......................... 0[b]

Total monthly expenses.................. 2030[/b]

[b]

Assets[/b]

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

House value (Gross)..................... 280000

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

Car(s).................................. 500

Other assets............................ 0[b]

Total Assets............................ 280500[/b]

[b]

Secured & HP Debts[/b]

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

Mortgage...................... 198000...(1167).....4[b]

Total secured & HP debts...... 198000....-.........-   [/b]

[b]Unsecured Debts[/b]

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

Family Loan....................6700......363.......4

Zopa...........................10017.....1.........0

Santander......................7316......1.........0

Gas............................1986......1.........0

Car............................1600......1.........0

CT.............................3446......340.......0

CC3............................525.......1.........0

CC2............................2766......1.........0

CC1............................3001......1.........0

OD.............................2300......1.........0

Zopa...........................4798......1.........0[b]

Total unsecured debts..........44455.....712.......-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 2,300

Expenses (including HP & secured debts). 2,030

Available for debt repayments........... 270

Monthly UNsecured debt repayments....... 712[b]

Amount short for making debt repayments. -442[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 280,500

Total HP & Secured debt................. -198,000

Total Unsecured debt.................... -44,455[b]

Net Assets.............................. 38,045[/b]

[i]Created using the SOA calculator at www.LemonFool.co.uk.

Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]

Hoping this works.  

John1298

The figures may seem a little weird, I am only responsible for the bits I have put in (long story, not for a public post)

fatbelly

John1298 said:

Hi everyone,

I have a situation.  I am currently in around 50k of debt.  Most of it I am paying a small token gesture, and interest is frozen.
However, 10k of it I am paying £700 a month, I can't get it lower (court ordered and family) and it is a chain around my neck, and I can't think of anything else. I am working 7 days a week, often 7am-9pm.  It also means I have zero left end of month.
The kicker is, in April I will have another £230 to pay monthly (new council tax bill).  

I have the option of taking on £10k more debt over 10 years, this would clear the £700 a month, and only cost me £170 a month.   This would free up £530 a month, which would be some towards clearing the other debt and the council tax etc, with even the possibility of saving a bit as I have no savings and no way to save.  However, it will of course cost me extra long term, but I could overpay to limit that, as my earning potential is increasing.

My gut feeling (and after playing with calcs) is to take the £10k, pay off the urgent debt and use the difference to get myself back on an even keel.

But this would increase my debt short term.

What would you do?

50k is a significant amount of debt, and token offers are not a sensible long-term strategy

You say that you have a court order to pay £700 on a 10k debt. Is that a ccj on a normal credit debt, or something different? You can ask the court to vary the order if £700 is not affordable. £170 would be acceptable if justified by the figuresThat would be one option.

There is no point trying to pay debt with debt due to interest.

The better option is to look for a strategy that deals with all your debt. Maybe run things past National Debtline