Advice required Please

JWM

Morning all, I have some questions on behalf of my brother, he doesn’t have access to a PC. Sorry if the queries are a bit basic, but I have no experience in this area.

History - DB and wife have a mortgage of about £180K on a property worth approx £275K. DB was unexpectedly made redundant last year. He got a job 2 months later but this new job is approx £6K less than the old one. They have 2 CCs, 1 loan and an Overdraft. The borrowing was mostly for house improvements planned on the basis of DB’s old job. They tried to borrow more from their mortgage lender (Abbey) to repay these. Because of the changes to DB’s wages they are now at the top of the max amount loaned due to salary (approx £45K between the 2 of them). So could no borrow more. They have increased the term to give them some breathing space.

They have cut back in other areas as far as they can, but still have car costs (the car is essential due to lack of public transport where they live), childcare costs etc. We have gone through the debt free forums and they have cut back utilities, phone, etc as far as they can. Their yearly holiday is paid for by Tesco Deals.

The most obvious thing solution is for DB to get a hob with a salary at his old level – but it is fast becoming apparent that he was being paid more than the market value (or this has decreased).

DB has £13K at 5.9% life of balance on Egg (repayment 5% pm) and £12K at 0% till Feb on A&L (repayment is the interest amount with a £10 minimum). When the A&L expires he has no where to move it to so I image he will be hit hard with the standard level of interest. The loan can not be extended further (it is for 10 years which they don’t offer anymore)

So my questions – if he asks Egg/A&L to reduce payments until things improve I assume he will lose the Egg 5.9% rate? Will they agree to reduced payments or will they make things difficult ie force him into a CCJ/sell the house situation? He can repay, but would like more time to do it.

What about a secured loan? I have heard bad things about them but if they are paid on time are they such a problem?

Is there any point applying for other cards as he was turned down by Virgin cos he has too much credit already?

Does anyone have any other thoughts?

Many thanks.

rayday2

A secured loan will cost a lot more than borrowing from your mortgage lender and can go up if interest rates go up. In fact mine went up more often than interest rates it started at 8.5% with a good credit history (not turned down for anything) and went up to nearly 11% when interest rates had only gone up about 1%.

Has he thought about alternative debt soluctions to borrowing - checking out one of the charity sites - I certainly wish I had rather than turning cards into secured borrowing.

Sammy_Girl

Hi JWM,

It would be best for your brother to call CCCS or talk to the CAB. I don't think taking out another loan will help. Maybe a good idea to post a SOA up here so that the experts can see where you can save money, and come up with some spare cash to throw at the debts.

Sammy x

JWM

Thanks, he has a appt with CAB for a fortnight, but I think his worry is the CC debts.

Can someone confirm if CC companies are likely to accept reduced payments......he is just so scared that he will have to sell the house. He's not sleeping at all and I want to reassure him (if I can) before the CAB appt.

Thanks again

Sammy_Girl

I think the CC companies will accept reduced payments if you are on a payment plan. But you'll probably have to ask them to freeze interest, otherwise the payments won't get anywhere. The best people to speak to are CCCS and CAB. If his appointment with CAB isn't for another couple of weeks, he/you could always call the CCCS from home and see what advice they offer.

Good luck :beer:

Sammy x

rayday2

Definately they do accept lower payments they just don't like to advertise the fact. As an example me and hubby are on a DMP we run ourselves and we have two credit cards with major bank one had a 3k balance and they accepted £5 no interest the other was £8k and had an offer of about £12 no interest.

I throughly recommend going on national debtline website and ordering him a free debt guide which will be full of information for him and is basically what CAB or CCCS will advise but he can read through it - definately enpowers you when you see what your rights are!

JWM

Will do, thanks!