GOOD DEBT Vs. BAD DEBT ADVICE PLEASE...

ChatChat_2

Here goes.

The good stuff:

1. House I live in currently has a manageable fixed rate mortgage of £650 per month.
2. I budget carefully and do NOT spend more than I earn each month though the family (two adults, two children) is left with a paltry disposable income each month
3. I do NOT have any credit cards or store cards - even though the bank offers me a credit card on a monthly basis!
4. I do not smoke OR drink OR gamble OR have another woman - WHY THE DEBT? :rotfl:

The bad stuff:

1. Mortgage set to increase to £780 at the end of July (I've searched - it is the best deal!)
2. Remember that paltry disposable income? Once the mortgage goes up - this will be almost non-existent
3. My partner is a student who will not be earning for the next two years
4. I am terrified of the gas and electricity hikes - they may cripple us :mad:
5. I have the following debts:

a) Halifax £3,500 overdraft - it just built up over the years with emergencies like car dying etc (the bank charges me around £50 per month for this)
b) Student loan £2,500 (interest is minimal but it still hangs over me)
c) We DESPERATELY need a new boiler - £1,800 (old one guzzles gas, is noisy and clanky and scary!)
d) I owe my brother £1,000

Q1) Would it be a good idea to borrow £10,000 against my house, paying off all these debts that are eating into my monthly outgoings? I really do not know what to do. I read somewhere on the site that DEBT is not the same as BAD DEBT but don't know if my contemplated course of action is advisable?

Q2) Should I contemplate those interest free credit cards to manage my debt - I know I would need to move it around before the interest free period ends but at 35 I am proud of never having a credit card and terrified of going down that route.

Any advice and assistance appreciated...

ChatChat

OberonSH

I think the first thing you need to do is to put down your income, and your outgoings (this is your Statement Of Affairs, or SOA) and see how much you 'should' have left. Then put it here and we'll see if we can help shave off your bills. It sometimes takes an outsider to see the cuts you can make.

You could remortgae - but you say the mortgage hike that's coming will eat up the disposable - so how will you pay for the additional loan????

The credit card option could be okay, but it depends how commited you are to not spending on it, and to 'stooze' (shift it around to other 0% etc once it ends). I think the best course of action would be to cut back if possible, in order to pay off the debt you already have. Then the payments these take up currently will make up for the hikes in the bills.

Pop up your SOA and lets see if we can help you cut back without having to get secured debt (scarey). And try not to panic - it can be sorted.

RedDino308

Hi ChatChat and welcome,

As Oberon says post up an SOA and the wonderful people will be able to offer some more considered advice.

In general shifting you debts over to your mortgage is a bad move because
- It turns unsecured debt into secured debt
- Spreads that debt over the period of your mortgage which means you will be paying through the nose for it.
- You won't have tackled the reasons for getting into debt or have adjusted your life style so it is very likely that it will happen again and you will be in the same position in a year's time.

Have you tried keeping a spending diary so that you can see where all the money is going to?

Look forward to seeing the SOA - the people here are brilliant and you could save yourself hundreds of pounds a month.

RedDino308

dancingfairy

Hi and welcome :hello:. Firstly have you done everything you can to reduce your electricity bills - low energy light bulbs/leave nothing on standby/turn lights off when not needed etc?
Secondly - have you considered a fixed tariff. They are generally slightly more expensive than your usual bill but with the predicted price rises would give you some certainty. I'm afraid I don't know much about how they work but I'm sure there is some info on here somewhere - have a look at Martins article.

Why not post a SOA (detailed budget) up so we can see if there is anywhere you can save money. People often find they can save money on their food- buying cheap value/basic food/batch cooking/menu planning / cooking cheaper food, etc.

Is there anything your partner can get cheaper deals on - for example they should be able to get discoounts in most places - you can always ask.

New boiler - I think there may be energy grants available to help replace boilers. Not sure how you would go about getting them though. Should help bring the bills down when you get it done.

Is there anyway your partner can work at all? evenings/weekends? Not an ideal option but possible? even Saturday work/1 or 2 evenings a week in a pub might help.

Ebay/car boots?

I'm not sure I would recommend either of your suggestions. I guess it would depend on how much equity you have in your house. This would add a lot of interest on and make it a very expensive way of borrowing - you would repay a lot more - also you could lose your house if you couldn't repay it I believe . How disciplined are you to know that that £10,000 would be it. It would be easy to get it and think - 'hey I'm rich' and unless you have a grip on your spending on a day to day basis (I'm not saying you don't - just it is a slippery slope) it could get swallowed up and you might be in a worse position in 2 years time.

0% could work if you manage it well but get it wrong and it could ruin your credit rating.

I appreciate that in 2 years time things should improve but I think you need to think it through thoroughly as it could have more implications than you think. You could be paying for it for 10 or more years to come.

I would try and post your SOA (budget) so we can see if there is any way at all to cut back. If these ideas don't help perhaps seek advice from CCCS or CAB or someone.

Is there anyone your partner could apply to for extra grants? not sure what they are studying but uni/college might have grants for people from certain backgrounds/ of certain ages/ hardship grants/local people grants/grants if your name is Smith etc. - might be worth looking into.

Good Luck and I hope some of this is helpful to you.

ChatChat_2

Hey guys,

I read that guy's message (is it Martin) about this board before posting and wondered why he was speaking so emotionally about the helpful advice that people give and I have to say that I am really touched, lump in my throat, wanna blame hayfever but it's the emotion you have induced as you spent time and effort helping me out. Where can I go for SOA links please? As soon as I find one, I will post it.

ChatChat

poorandindenial

Hi ChatChat

There is a calculator thingy for your SOA here:

https://www.makesenseofcards.com/soacalc

Good luck with getting sorted

ChatChat_2

Hey Friendly Folks,

Here is my SOA. (deep breath, relax, relate, release). Any help appreciated.


TOTAL INCOMING £2,000
Mortgage £650
Groceries £300
Petrol £140
Council Tax £80
Bill - Atlantic – Gas £75
Bill - Atlantic – Electric £55
Bill – Union membership £16
Bill – Mobile 1 £20
Bill – Mobile 2 £10
Bill – Water Rates £45
Club – Martial Arts £80
Insurance - Car £60
Insurance - Home £21
Repayment - Student Loans £35
Repayment – Sofa £66
Repayment – Brit Gas £20
Repayment – Halifax overdaft £60

TOTAL £1,733

REMAINS £267

One thing that I would like to say is that my gas is so high for two reasons.
1. old boiler, dodgy as heck that guzzles gas as bad as the car guzzles petrol and
2. I messed up my direct debits with Atlantic Electric for a year and did not know I was UNDERPAYING and so built up a huge £600 debt. I am now paying my gas bill and a little extra to try eating into the debt. If I left Atlantic Electric, they would simply pursue me for the money and perhaps want to charge interest, right? (no payment capping option either!)

The good gas news? I only have ONE more £20 payment to British Gas and then I will owe them no more!

Secondly, I owe £111,000 on my mortgage (23 years). Halifax are charging me £500 (which I will have saved by the end of July, when new mortgage kicks in) to 'arrange' the new 3 yr fixed rate 6.4 mortgage and it still goes up to £780! If anyone out there knows of better deal, please let me know as I have looked with no luck.


A reminder of my debts:

a) Halifax £3,500 overdraft - it just built up over the years with emergencies like car dying etc (the bank charges me around £60 per month for this - so although I am paying this, the debt does not go down)
b) Student loan £2,500 (interest is minimal but it still hangs over me)
c) I owe my brother £1,000
d) We DESPERATELY need a new boiler - £1,800 (old one guzzles gas, is noisy and clanky and scary!)



ChatChat

jo_b_2

ChatChat wrote: »

We DESPERATELY need a new boiler - £1,800 (old one guzzles gas, is noisy and clanky and scary!)



ChatChat

Well done for spending the time filling in your SOA. It will help to see where the money really does go to!

With regards to the boiler, you could be eligible for a grant (dependent on your local authority's policies and criteria.)

All the relevant links and information are in Martin's article on grants: http://www.moneysavingexpert.com/protect/grant-grabbing

A few other thoughts:

As your OH is a student you should be eligible for a reduction in your council tax. Are you claiming any tax credits etc that you might be eligible for? Check out the calculator at https://www.entitledto.com

Good luck and try not to panic. :wave:

ChatChat_2

Thanks for the links jo_b. I had NO idea about boiler grants. Do they also do grants for solar panels so I can stop my leccy bills and use the sun:j! I will look into that. Yes, I get the student discount for the council tax, it's not much but everything helps.

One more thing, I actually did not do an SOA - I literally cut and paste the budget that I formulated for us. Thing is, I never seem to quite stick to it completely ... there are always little emergencies that come along each month... and I have to confess to the occasional "FORGET THIS! WHY AM I WORKING SO HARD???" and I will splurge on the family and take them out for a meal or buy myself ... wow ... a book or... nothing rdiculously extravagent but you know what I mean, it eats into the budget you have worked so hard to maintain. And when you look at the budget, you wonder, it is month after month after month until what? Death?

I'm rambling and griping and I am the most positive individual you will meet ordinarily but ... you know... the debts get you blue and I KNOW that my case is not as bad as some others but still, I am upset I got myself (and my family) into this predicament.

Thanks again for your help.

Triker

Re your OH being a student, most colleges and universities have hardship grants, ask in the student union office or student support office in order to get an application form.

Most like to support students who have children, always worth a try.

Welcome by the way, stick around, we can help,guide,support through pretty much anything.:D

NUFCnutter

Am busy trying to sort myself out Chitchat, and know how scary it can be. Just hang in there and take all the advice from these people. They are fantastic and will be there for you. :hello: