Can I ever be debt free?

smallperson_2

Hi All

This is the first time posting to the site and I have finally plucked up the courage to post a message. There seems to be loads of valuable information and people in similar situations and I have found reassurance from reading some of the postings which kind of gave me the courage to make my own posting. I need advice really as I have come to a point where I am worried for my family's financial future.

Here is a summary of the situation. I live with my husband and we have a baby due next month, we were not careful with our money and got swept away by loans and various credit cards which we paid off with loans and then spent more and more and more....

Here is the first problem....about 3 years ago I was naive and got sucked into the secured loan option and took a loan out with First Plus. I regret this every single day and the stress it has caused me since is terrible and the crap they preach on their averts is appalling. Anyway I signed up to it so I have myself to blame and I do that every day. The loan was for £80k at the time and then with their interest and protection it takes us over £100k so we are paying nearly £900 per month to them for what will be the rest of our lives. I went to a FA about it and we were going to cash in some of the equity on our mortgage to pay off some of the debt but First Plus wouldnt allow it as they said we hadnt paid them enough. We are expecting some cash back from them in 2 yrs but the joke is that we can pay that off against what we owe but we can reduce the term as we then start a new agreement. I feel like I am now stuck with them forever, interest rates rising and soon their payments will over take our mortgage and I am worried I will then have to think about bankruptcy and I will lose everything. Can anyone help me out with the secured nightmare, I cant seem to find much advice with secured loans only unsecured. I am scared and to be pregnant and not sleeping and having this stress is really starting to take its toll.

The second problem is that due to our spending habits historically we didnt learn when we spent all the money and signed up with First plus and we spent more and more, we then built up unmanagable unsecured debts, we then got referred to Payplan who I can say have been fantastic. We are on a debt management plan and it has changed our lives in terms of managing our money and I know for a fact I will NEVER EVER EVER get credit cards, loans or anything again as I now feel in control of what we are spending BUT....the problem now is that my salary in my job has dropped and has dropped so much we will not be able to pay payplan what we can pay them now and with the baby on the way our expenses are going to increase. I have cancelled my pension (which again stresses me out), we have cancelled all the non essential things to make sure we are only spending money on what we should.
I am due to revise my income and expenditure with them and send it off to them this week but I am scared of what they will say. I am only taking 6 wks off work for maternity as I am the main financial provider and I want to make sure we can pay the bills, plus as I am back I start on a commission plan so I am hoping to earn some money there but there is no guarantee with commission.

Payplan have wanted to approach us about an IVA but I havent avoided this until now as I didnt think it was appropriate and also because of our secured loan I dont think it is an option.

To summarise, I want to be debt free but I am worried that the only option is bankruptcy due to the secured and unsecured loans and that really really worries me as we both have good jobs and a nice house and I am scared of losing it.

Lastly, we have 3 life policies which cover death etc and we are paying nearly £35 each for them which is alot, can anyone recommend a provider we could go to that could offer us a better option?

I found out that I was paying for house insurance twice so I have sorted that out this week, I didnt even realise.

I really want advice as I feel that I am in a black hole, depressed, scared and worried. I really dont want people to judge me, i know its our own fault but we have seriously learnt our lesson and I just need to know the right way to approach this and I wish I had known what I know now before i signed up with First Plus. Its depressing as that money could have been used for investment not debt but thats where I am.

In summary:

I need advice on the secured loan problem
I need advice on the reducing salary and payplan payments (should we go for an iva or bankruptcy)
I need advice on life insurance policies, what should we have and with whom?

If you have got to the bottom on this email thank you for sticking with it and reading it and I hope you can help

Frugaldom

Hi smallperson, welcome to MSE and well done on deciding to post here.
I am not in any way able to advise you, but I have been down the 'secured loan' path (with same company) and their payment protection promise of refunding all the money etc. We never saw any of that money back because we had to sell up before the policy 'matured'. (Long story, not relevant here). Do you have enough equity on your house to cover all the debt if you sold up everything and moved into rented accommodation for a while? If not, then have you worked out your current state of affairs using one of the free spreadsheets? Then, at least, you'll can post all your income and outgoings here and let others suggest ways of helping.

Sorry I am not much help, but you've made a good move coming on here and asking for help

PS: In answer to your original question, the answer should be yes - you have the potential to become debt free

smallperson_2

We only have about £40k in equity so not enough to clear secured or the unsecured loans... I have a SOA which I can post on here but as are on the debt management plan with payplan we kind of know where every £1 is going at the moment which makes it hard for me to know what to do especially when my salary drops in May and the baby is here.

I will do a spreadsheet and will post on here to see if it helps...I am kind of embarrased to that though but will do it if it helps us out

RAS

Small person

Please can you clarify

Current value of house?
Morgage outstanding?
Secured loan outstanding?
Unsecured debt?

saffronflowers

HI SP and welcome

You would b e amazed what we cando with an SOA - so post it up and let us have a go!!!

As regards the baby, they really do not have to cost a lot of money, I promise you that the little one will not hold it against you if they are dressed in baby grows from charity shops!!! Cos litle ones are in their clothes for such a short time, you can find very good quality clothes for very little money.

SFx

Frugaldom

If you already have an SOA and know where all the money goes, perhaps you could just post your household budget without the debts payments, which are already accounted for? That way you are leaving the 'debt payment funds' to do their job and all you need to focus on in affording to live off whatever is left

smallperson_2

Thanks SF, we are lucky to have had very generous parents who have kitted out the nursery like mothercare and i had a baby shower the other day and was given some lovely clothes so we havent had to spend much but your right it doesnt have to be costly, my main concern is feeding the little one and keep the roof over its head and I am so stressed about it I dont want it to tarnish what should be a happy time.

x

smallperson_2

Just sorting out all the figures and will post asap, I dont have them all to hand embarrasingly !

RAS

Fine - not many of us would have them to hand!

Can I suggest that you sign up with the local group of www.freecycle.org, which is like e-bay but the goods are given away free. great for clothes for small people and toys.

smallperson_2

Value of house £180,000
Mortgage outstanding: 153,000
Secured debt: £120k (this is a rough figure from memory the file i need is in the loft which I cant get to until later on)
Unsecured debt: £52084.19 (to complete roughly 2018!!!)

Here is our current SOA:

my income: 2,200 pm this is due to drop to £1800/£1900 1st May
partners income: 880 pm
partners 2nd job: 300pm (does vary due to overtime but not guaranteed)

Total £3380 (there are variables to this when I start earning commission which could be anything from £650 up to £4k)

NOTE: Payplan have an income of £3642 but this is not correct and I am due to send them a revised amount.

Expenditure (note some of the items listed below are what payplan have built into our CURRENT budget they then take what is left over which is currently £500 a month but this is based on current income and this will have to reduce.

Outgoings

Mortgage £900 (includes building and contents insurance £48.58)
First Plus Loan £896
Council tax £126
Elec & gas £80
Water £40
Orange broadband £5 needed for work
Land phone £30
Life assurance £95.49 (we have 3 policies)
HP £178.44 for both cars
TV licence £11.77
Insurance car £121
Petrol £160
Road tax / mot mthly allowance £36.00
Maint £30
Food £320
Clothing £40 (we dont spend this and use this money for other things bills emergency)
Dentist / contact lenses £40 (contacts are actually £25dd)
pet insurance £35 (two boxers)
hair £16 (we dont put this by and I have my hair done when absolutely essential, every 4mths)
payment cover with payplan £47.95
Mobiles £60 we are in contract so cannot reduce

we currently pay payplan £500pm this is bases on their salary calculations and the above expenditure, I have to send them a revised copy asap as our salaries are lower and we have had rising expenditure costs. I think our payments to them will be considerably lower and I am scared of the impact of this.

I can also have the option to take a company car which would mean I could sell mine and not pay insurance etc but there are tax impliations so not sure what your advice is on that.

Hope this all makes sense !

smallperson_2

Thanks RAS I will do that now..