Philanthropy got me in debt

Sophos

Hello fellow debt free wannabes!

I would really appreciate any advice you may be able to provide me with my current debt situation.

My debts have arisen almost entirely out of my philanthropy. Over the past several years I have made considerable donations to very worthy causes most of which I have first hand experience with. I know, I know…how silly of me to give away money I didn’t have but I knew that I could handle these debts and I put the needs of others before my own. I have bitten off more than I can happily chew so that’s why I’m here!

My debts are as follows and first up are the credit card debts:

Lloyds TSB Mastercard £13,695
Limit is £14,900
Currently paying 14% APR on purchases and 24.9% on cash advances (I’ve made about 1,000 – 2,000 in cash advances on this card – silly I know but I was desperate when I did so).
Most recent monthly repayment was £276 and interest was £210.

Liverpool Victoria £13,685
Limit is £15,000
Currently paying 16.62% APR
Most recent monthly repayment was £276 & interest was £187.

Post Office Platinum Mastercard £7,185
Limit is £8,000
Interest rate is 15.9% APR
Most recent monthly repayment was £182 and interest was £90.

American express balance £6138
Limit is £6,400.
Purchases 15.9% APR. Cash withdrawals £27.9% (perhaps £1000 in cash withdrawals made on this card)
Most recent monthly repayment was £155 and interest was £133.

ASDA card £2,254 at 16.8% across all the debt
Limit is £2,500
Most recent monthly repayment was £69 and interest was £30.

Therefore I repaid £958 last month on these credit card debts but in the same time accrued another £650 in interest! It’s painful thinking about this! I’m making remarkably little progress in handling these therefore.

Total debt on credit cards is £42,957

I also have an Alliance & Leicester loan, the outstanding balance of which is £17,427. I took this out as a £25,000 loan in October 2006.
Total amount repayable (capital + interest) £28.845.60 over 4 years

My current account balance today is about £500

Total Debts are £60,384
Total assets are £500

My net worth = -£59,884

Now I don’t drink alcohol, I don’t smoke; I don’t spend frivolously unless for philanthropic purposes but that has been curtailed until these debts are handled. I don’t go out socialising much and don’t buy expensive designer clothes or gadgets. I’ve used the budget planner on this site and have worked out that once I have paid all my monthly loan and credit card commitments I have about £300 left to spare which has been going towards handling my overdraft over the past many months. I have a £1,500 overdraft facility on my current account and I was eating most of the way into this up until a few months ago. Now I’m not having to go into it much if at all by the end of the month.

My income:
I’m a professional man on a salary package worth about £57,000 a year. I have a house and car provided with my job and I take home about £2,750 a month after tax and national insurance of about £950…grrrrrrr!
I have no savings to amount to anything.
I don’t believe it worth telling you about my smaller monthly outgoings as I don’t think any savings I might make there will allow me to make a significant impact on the above.

I applied for a loan to some provider about 6 months ago but was declined. I was late with a one or two credit card payments a few months before then but haven’t missed any repayments for the past 8 months approximately. I owe Lloyds TSB over £13,500 on their platinum mastercard yet they refused to convert this into a loan which I think is preposterous. Their computer probably considers me too high a risk to give a loan to yet they’ll happily charge me 14% for having all that outstanding debt on their card.

I’d be most grateful for any advice anyone can offer me to help me get out of this situation. I don’t want to apply for any loans just yet (I would need several as no one provider, in my opinion, is going to take on the burden of all of this debt unsecured) as I suspect this could negatively impact on my credit rating so what can I do to allow me to seriously downsize the interest I have to pay on this debt without damaging my credit score?

I look forward to your suggestions and thank you for taking the time to read this posting.

Kind regards,

Sophos J

GeorgeUK

Have a look at the snowball calculator at whatsthecost.com

It will show you how much to pay to each debt and the length of time it will take to pay off. Usually paying minimum on all debts and throwing everything else at the highest interest one is best.

Believe it or not, but if you haven't applied for any other credit in the last 6 months, i would suggest you apply for a CreditCard - probably Virgin Money.

The idea is to reduce the amount of interest you are paying on the debts, so if you get this card you will have 0% on Balance Transfers for 15 months. Hopefully it will be a sizeable amount but as your debt is around 1 years salary, you may need to just start small and try for other 0% offers when you clear a card. Some providers offer you this if you ask about closing a card - incentive to keep it open.

Totally agree with you about not wanting more loans. You need to get the debt sorted before you can help others financially.

Tustastic

Hi Sophos and well done for posting. Even if you're not comfortable with posting your detailed finances on here, it would really help you to set them out for yourself as per http://www.makesenseofcards.com/soacalc.html
It's hard for people here to know how to help you without having more of this information.
Be careful about dismissing the possibility of helping yourself by reviewing your regular monthly outgoings. People here have saved badly needed £££s by making small but positive adjustments to their regular bills.
Standard debt-busting advice is to try to pay the most off the card with the highest interest. Enter your figures on www.whatsthecost.com to see how this could help you.
The Asda card seems to have the highest interest; if you make a push to pay this off first and close the account, it could also help your credit rating.
Do keep posting - the boards are quiet at this time of night so post again during the day/evening to 'bump' your post and the experts will be along to help.

Bismarck

Hi Sophos J,

You've had some great advice that I can't really add to but I'd like to say it's a change to see someone in debt for these reasons...I'd like to say "well done" but am not sure if that's the right thing to do!

floss2

Sophos wrote: »

.......I’m a professional man on a salary package worth about £57,000 a year. I have a house and car provided with my job and I take home about £2,750 a month after tax and national insurance of about £950…grrrrrrr! I have no savings to amount to anything.

I don’t believe it worth telling you about my smaller monthly outgoings as I don’t think any savings I might make there will allow me to make a significant impact on the above.......

Personally I think you have already damaged your credit score.....and in the tightening of the credit-crunch, you are going to find it more & more difficult to find anyone willing to lend you that sort of money, even with your income.

I suggest you contact one of the debt-support charities with regard to freezing the interest on these cards to allow you to actually pay the balance and not just the interest.

Also, with that level of income, if you DO allow the guys on here to help you make more savings on your monthly budget, you will be able to throw more than that £300 a month towards the debts. You might be pleasantly surprised at how you can save money without noticably cutting your lifestyle. Although, if you are willing to change the way you live now to get your life back on track for the future, then you will be able to save even more.

BTW Are you actually paying that £300 off anything, as it would clear the Asda card within about 7 months.....which would then give you that £369 to throw at the next highest-rate card.....etc etc.

:wave:
Floss

Sophos

Many thanks for all your advice so far...it's much appreciated! :-)

Here's my statement of affairs which some of you might be able to make some suggestions on regarding savings I might make. I live on my own in a 3 bedroom semi-detached house which is provided with my job as part of my salary package hence no mortgage or rent (council tax is also paid by the company) and a car is also provided to me. I don't pay for its servicing, tax or insurance.

Statement of Affairs and Personal Balance Sheet

Monthly Income Details
Monthly income after tax................ 2750
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2750

Monthly Expense Details
Mortgage................................ 0
Secured loan repayments................. 0
Rent.................................... 0
Management charge (leasehold flat)...... 0
Council tax............................. 0
Electricity............................. 25
Gas..................................... 30
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 5
Mobile phone............................ 30
TV Licence.............................. 12
Satellite/Cable TV...................... 0
Internet Services....................... 18
Groceries etc. ......................... 130
Clothing................................ 20
Petrol/diesel........................... 80
Road tax................................ 0
Car Insurance........................... 0
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 5
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 40
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 8
Presents (birthday, christmas etc)...... 10
Haircuts................................ 9
Entertainment........................... 20
Holiday................................. 100
Emergency fund.......................... 0
Total monthly expenses.................. 542

Assets
Cash.................................... 500
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 500

No Secured Debt

Unsecured Debts
Description....................Debt......Monthly...APR
Lloyds TSB mastercard..........13695.....276.......14
Goldfish.......................13685.....276.......16.62
Post office Mastercar..........7185......182.......15.9
Alliance & Leicester...........17427.....600.......8
Asda Mastercard................2254......69........16.8
Amex...........................6138......155.......15.9
Total unsecured debts..........60384.....1558......-

Monthly Budget Summary
Total monthly income.................... 2,750
Expenses (including secured debts)....... 542
Available for debt repayments........... 2,208
Monthly UNsecured debt repayments....... 1,558
Surplus(deficit if negative)............ 650

Personal Balance Sheet Summary
Total assets (things you own)........... 500
Total Secured debt...................... -0
Total Unsecured debt.................... -60,384
Personal net worth...................... -59,884

Created using the SOA calculator at www.makesenseofcards.com.
Reproduced on Moneysavingexpert with permission.

duchy

£40 sounds awfully high for medical/prescription especially if (as seems likely) you have private health insurance. Have you investigated the prescription "season ticket" scheme ?

Poosmate

Hi Sophos and welcome to DFW on MSE.

Thanks for posting your SOA.

Now please bear with me because it's very late and I need to go to bed but I can't stop posting!

But, my immediate observations are, your grocery bill. You could probably shave about £30 or more off that. I'm currently feeding 2 adults on £120pcm (and he eats like an elephant and is not trained in the art of "stuff costs money"! I mean why use 1 piece of kitchen roll when 4 will do (3 totally unused just screwed up! What a waste!).

My second observation is your holiday fund. You are paying £100pcm on it - where are you saving this as you say you have no savings (to amount to anything)? If I were you, I would at least halve it and put £50 into an emergency fund (high interest ISA) and add the other £50 towards your debt. At least then at a later date you can either use your savings to pay off a debt early or go on holiday or just keep them to build up but you have options there.

Alternatively, pay the whole of the £100 towards your debt (for now) along with the other £300 you've used to climb out of your overdraft (so envious of you for that!). You could probaby bring your Asda debt to an end in 5 months instead (unchecked - going by what Floss said) then you'd have an extra £469 (£100+£300+£69) to put towards the Goldfish card.

Myself, I declined an almost free holiday yesterday (all I'd need to pay is airfare 1 way and food whilst there) but then I have nowhere near the disposable income you have so I have to be cruel to myself to be kind.

Hope this helps and hope it makes sense - it is very late!

Thanks

Poo

Poosmate

Oh sorry, I just thought, probably a no go with it being a company house but could you take in a lodger?

Going to bed now I promise!

Best of luck

Poo

tyllwyd

Looking at your SOA, as you said your day to day living expenses aren't high, it's the money you owe that is crippling you.

I think maybe you need to have a bit of a re-think about your situation. You are a single man on a good salary, so you feel wealthy, but in reality your take-home pay isn't exceptional by the time you've paid tax (and possibly pension?). The main saving you have is because you aren't paying rent or a mortgage, which is good in one way, but at the same time you aren't building up equity in your own home, so if you are not paying out that money the sensible thing would be to be putting it aside as savings so that if you lost your job or retired you'd have money behind you to make sure that you could find somewhere to live - but instead you've given all that money away and more, so you've got a mortgage's worth of debt at personal loan rates - so you might well be worse off than other people here with lower income but with money invested in their homes. Quite honestly, I think you have probably done your giving to charity for this lifetime, you need to think about your own situation from now on.

If you don't want to take out a loan, in my opinion the best thing to do is to keep on top of what you are paying and make sure you are paying off the most expensive debts first. You have to be realistic, it is going to take years - if you took a mortgage out for that £60000, even at a low rate of interest like 5% (if you could get it), you'd probably be paying it back over 15 or 25 years, so at 14% plus you aren't going to clear the debt in a couple of years.

Have you looked at the snowball calculator at http://www.whatsthecost.com/

GeorgeUK

Got to agree with the above - food too high and you have no savings to rely on should your contract end. Don't know how old you are, but have you thought of pension and accommodation once you stop working?

I'd check your credit file (free at experian if you cancel within 30 days). This will also show you how many credit checks you've had in the past 6 months. 3 is usually ok before it starts to affect your credit score, so from what you've said you may need to wait a bit longer before applying anywhere. I'd wait until you only had 1 in the last 6 months so that you have a good chance of getting accepted.

Make sure you are keeping up to date with payments. Paying late could also affect your credit score if it happens too often. Set up a SO or DD to ensure that you are paying on time.

I'd pay the minimum on everything but the Asda card - not just because it's the highest APR. The sooner you can clear that, the sooner you may be offerred a 0% BT deal if you ask to close it. The limit may not be as much as the others, but it looks like these offers will be your best bet for a while. Plenty of other tarts on the board too.

You may not feel that a couple of pounds saving here or there will make much of a difference, but if you put it into the snowball calculator, you will see that even these small increases can make quite a dent in the time and interest you will be paying. You have £650 to throw at the debt each month which is great, but if a few of the cards increase their rates which some have been doing lately, you could begin to struggle. You're tackling it in time so now you need to throw everything at the debt to clear it asap. Hopefully in a few months, you'll be able to get some 0% deals, but it's time to tighten the belt i'm afraid.