Reached end of the road - 54k debt

abaka

I've posted here numerous times over the years when in some sort of debt crisis or another, but feel like I've hit the end of the road.

I earn 42k a year and I'm in debt to around 55k a year.

My debts are currently as follows, Credit Cards and Loans

• Virgin1 - 1404 (Interest free for another 16 months)
• M&S - 2501 (Interest free until May 2027)
• Virgin - 3979 (Interest free until July 2027)
• Barclaycard - 7290 (Interest free until March 2029)
• 
  Credit Union1 - 2222 (This is £70 a month and my wife gives me half, and is until 2032
• Nationwide Loan - 15480 (This is £245 a month until 2032)
• Credit Union2 21,411 (This is £300 a month until 2035)

Essentially last year I took out a consolidation loan from the Credit Union to consolidate more than half of my debts. However since then, my wife got pregnant and I got a promotion to a higher paying job for 12 months secondment and as a result the debts just balooned again. This is why consolidation doesn't work!

I earn £42k a year and have savings of £3k which I never had until last year (thankfully the year in the higher paying role wasn't squandered!). At this point I currently pay £1060 (incl the half of the payment my wife gives me to CU1 payment. I also still manage to put £200 into my savings which is a generous amount.

I've not increased my debt in about 3 months since reverting back to my usual job.

However I am very much faced with the possibility of needing to do more balance transfers within the next 16 months.

I project that Virgin1 will be paid by the time interest is due. M&S will be reduced to £1801 and Virgin2 will be reduced to approx £3379. But trying to combine these two debts will be difficult (I do currently have the offers on existing cards)

But I am now considering defaulting as I'm sick of living in this merry go round of every 2 years needing to do new transfers etc.

However I know CUs are difficult and I'm considering just continung these payments as normal as I don't want to damage my standing with them let alone deal with the difficulties of them.

Plus I don't want to stop paying on my nationwide loan

If I were to stop paying all my credit cards from today - I'd be able to save £440 a month (plus I'd be still saving the £200 a month so I'd have a sizable emergency fund if I save £640 a month)

My only concern is some of the debts are sizable, esp with Barclays.

And I also don't know if I'm stupid to start defaulting right now when it's all affordable and I'm paying no interest? Because when defaults come in, I know the current debts will increase due to interest resuming and late payments etc.

Isthisforreal99

Post your full SOA.

abaka

TBH - It's difficult to post a SOA the way me and my wife manage our joint finances.

We both pay a set amount into our joint account each month (980 which covers mortgage, bills, car, fuel etc, childcare etc) TBH, my wife manages all the bills and running of the house, I just pay. I know the joint account covers it all, unless there's an issue. For example I used to only pay £900 but a few months ago in April she mentioned the childcare/SKY had increased in price so as a result I increased my amount to £980) (She's currently on maternity and not being paid so I agreed to cover the full extra costs.

Pretty much every penny I earn myself goes towards my debts once the money into the bills is sorted. The debt was ran up due to a pretty expensive hobby and lifestyle that is now closed to me and also an element of risky behaviour due to a currently undiagnosed Bipolar condition on my part.

For example my finances are as follows:

Househ - 980
Nation - 250

Virgin - 270
M&S - 70
Virgin - 50
Barclay - 90
Cred - 300
Personal - 150
Cred U - 40
Phone - 30
Apple M - 10
Xmas - 20
Savings - 200

This is pretty much my takehome pay broken down down to the last £5/6 quid etc.

The personal cost is for private therapy which can't be avoided. I could potentially cut out the apple music but is £10 a month going to make a big difference. The £20 for Xmas is because me and my wife both save this amount each year so that we have a sizable pot of money set aside for kids christmas presents.

My budget does show I have £1070 going towards debt repayment at present. Approx £223 of that is on interest. The biggest issue is that I'm tied to at least £620 a month in repayments.

My current plan is to reduce the debt by snowballing. As Virgin is my lowest amount I owed, I'm currently pumping everything into that but I am wondering should I consider just paying the minimum on each card and pumping everything into the Credit Union loan as that's the highest interest one.

However, even if I paid the minimum to the cards and pumped everything into the larger CU loan, it would still take 4 years to have reduced that debt. Whereas if I keep focusing on the smaller debts first, I could have paid off the two Virgin Cards and the M&S card within 2 years so I'd get smaller victories at earlier opportunities.

fatbelly

Logic says there is no point starting a dmp if you can afford the contractual payments and the debt is st 0%. But you now have a long history with this and it does not seem to be getting better.

I agree with you that consolidation doesn't work and credit unions are best given some priority over credit cards and personal loans. In fact if you can overpay, and the credit union will accept overpayments then I'd do that rather than overpay a 0% credit card.

If you get to the point when you cannot afford the payments then default on the cards.

abaka

You're right I have been at this a long time, but never really removed the risky behaviour and hobbies that caused this debt until now. I just seem to find my way back into this same old mess every few years. There's no sign of my 0% offers drying up and I'm currently approved for a 36 month card with santander which would cover the three balances that are due to end 0% in the next 16 months. And I'm currently making well over the minimum payment and setting money aside for savings also.

I'm now torn should I try and overpay the two credit union loans and just pay the minimum on all the cards. That means I'd likely have to do a few more balance transfers than I'd like to have to do.

I do think you're right, I should continue to pay whilst I can.

RAS

What are the APRs on the credit union debts?

ManyWays

Are the two credit union loans from the same CU? it would be helpful to know the interest on them.
The CU your wife pays half for, is that in joint names? or in your name but you both agreed on taking it together?

Your mortgage, what interest rate is it at the moment? when does your current fix end?

Is your income pretty stable? Is your family now complete/

enthusiasticsaver

I think if you are still getting 0% deals and are managing to make over minimum repayments and save then you should continue. However if you find yourself spending on credit you are obviously unable to manage and then it is best to default and stop this situation getting worse.

abaka

The CU loans are both 6% and the same CU.
Both in my name, we took out a loan for a bathroom refurb that was desperately needed, paid by both of us. This was also done before the debts really got on top of me and got overwhelming. Most of the debts are just me living beyond my means.

I actually don’t mind the debts where I’ve been able to do something nice in the house that benefits the family.

Our family is now complete and yeah, mt job is very stable and secure. Public sector and well established. I don’t have anything to worry about in that front tbh.

the mortgage is at 4.01% and is fixed for another 2 years. We have a low LTV so in an incredibly strong position on that front also.

ManyWays

I think you should talk to Stepchange about an IVA. They will know know if one is likely to be approved - either the CU or Nationwide would be able to veto it, but they may not. Stepchange may know if they have in the past.

Do NOT underestimate your expenses when talking to Stepchange. You want a budget you can comfortably live within for 6 years.

abaka

I'm really not sure an IVA is a correct approach for me. At this moment in time I'm meeting my contractual payments and then some and whilst it's frustrating having this noose hanging over my head, i'm not struggling to get by each month. I live a comfortable If a DMP isn't wise on my current circumstances, then I don't see how a formal insolvency would be much better?

Either way I'd expect the CU to veto it as they are known I believe to go straight to formal action to recover funds but it's an option I'd not like to explore either.