Paying Off Debt

AnonymousM · 17 February 2019 at 5:58PM

Good afternoon,

I have accrued debts of over £20,000 on credit cards.

This has been rising and rising since February 2018. At that point I was at £14,000 debt in total. The aim was to have it all paid off by the end of the year with the last payment being on pay day of December 2018 as a Christmas present to myself as my wage was rising rapidly.

This never happened due to the business I worked at going bust so therefore I lost my job.
In order to cover bills and payments I used credit cards to keep afloat before I managed to get a new job.

The job hunt lasted 3 months so I was effectively without a proper income for that amount of time.
I was receiving Job Seekers Allowance but many problems arose with that due to pre-booked holidays for the World Cup and not being in the country for 3 weeks and received housing benefit to help towards rent costs.

I am paid £36,000 a year now. (£30,000 at old job)

I just wanted to get things down and receive some encouragement to get through this phase and get myself on the right line of where I should be.
The aim is to get this paid off sooner rather than later.

Currently,

Savings: £0
Overdraft: £500
HSBC Loan: £3,080.96 - 8 more payments of £385.12.
HSBC Credit Card (Limit £4,000): £4,036.26 @ 21.9% APR. Just been taken over the limit because of interest applied.
Barclays Credit Card (Limit £5,650): £5,643.11 @ 26.68% APR. February statement due soon so this will go over the limit also.
Halifax Credit Card (Limit £4,500): £4,440.13 @ 22.20% APR.
Virgin Credit Card (Limit £8,200): £8,199 @ 19.17% APR.

Total Debt: £25,899.46
Credit Card Debt: £22,318.50

I live with a friend. The house is his families so we get the benefit of cheaper rent compared to what we could be paying privately or through a landlord.

Income: £2,247.12

My outgoings:
Tax: £25.37
Vodafone: £15
Loan: £385.12
Rent, this includes all bills/council tax: £550

This leaves me £1,271.63.

With this I need to pay off the credit cards each month.
Minimum payments all totalled together: £701.33

This leaves me £570 a month for anything else. Usually paying off more than the minimum on the cards but then leaves me short for anything else so I end up having to use the credit cards.
A vicious circle.

Petrol for work: £40 a week - £160 a month.
Grocery shopping: £30 a week - £120 a month.

Leisure: I have a season ticket at the football. Usually bought around June/July time £250.
£30 a Saturday for a home game.
£100 if at an away game.
We buy train tickets in advance to take opportunity of the savings and I have a 26-30 rail card which helps. This includes travel / admission fee. These costs change so allowing £100 is an over-allowance.

I have car insurance renewal in May and MOT in September.

I have severely restricted my outgoings by stopping eating out so frequently, pub during the week and Sundays. I've got to the stage where there are days when I spend absolutely zero.

I'm now not in a situation of being able to get a balance transfer 0% card because of the high utilisation of the current credit cards.

Just after some wise words because I want to get debt free within 24 months so I can move on and start actually building up funds.

I got myself into this, so I must get myself out of it and I'm determined to do so.

Help! :j

a_silver_lining · 17 February 2019 at 6:17PM

Hi there and welcome

it looks like you have a good bit of spare income to play with. I would advise making a spreadsheet or some kind of plan outlining all the expenses you are talking about upcoming (the matches and car), or doing an SOA. This will let you work out realistically how much you can pay on top of your minimum payments.

Others will be able to advise on ways to improve the interest you are paying, I'm sure.

It may be that if you can't reduce your outgoings then you will need to find some additional income to hit your 24 month target.

£25900 devided by 24 months is £1080pm.

JayRitchie · 17 February 2019 at 7:52PM

AnonymousM wrote: »

Good afternoon,

I have accrued debts of over £20,000 on credit cards.

This has been rising and rising since February 2018. At that point I was at £14,000 debt in total. The aim was to have it all paid off by the end of the year with the last payment being on pay day of December 2018 as a Christmas present to myself as my wage was rising rapidly.

This never happened due to the business I worked at going bust so therefore I lost my job.
In order to cover bills and payments I used credit cards to keep afloat before I managed to get a new job.

The job hunt lasted 3 months so I was effectively without a proper income for that amount of time.
I was receiving Job Seekers Allowance but many problems arose with that due to pre-booked holidays for the World Cup and not being in the country for 3 weeks and received housing benefit to help towards rent costs.

I am paid £36,000 a year now. (£30,000 at old job)

I just wanted to get things down and receive some encouragement to get through this phase and get myself on the right line of where I should be.
The aim is to get this paid off sooner rather than later.

Currently,

Savings: £0
Overdraft: £500
HSBC Loan: £3,080.96 - 8 more payments of £385.12.
HSBC Credit Card (Limit £4,000): £4,036.26 @ 21.9% APR. Just been taken over the limit because of interest applied.
Barclays Credit Card (Limit £5,650): £5,643.11 @ 26.68% APR. February statement due soon so this will go over the limit also.
Halifax Credit Card (Limit £4,500): £4,440.13 @ 22.20% APR.
Virgin Credit Card (Limit £8,200): £8,199 @ 19.17% APR.

Total Debt: £25,899.46
Credit Card Debt: £22,318.50

I live with a friend. The house is his families so we get the benefit of cheaper rent compared to what we could be paying privately or through a landlord.

Income: £2,247.12

My outgoings:
Tax: £25.37
Vodafone: £15
Loan: £385.12
Rent, this includes all bills/council tax: £550

This leaves me £1,271.63.

With this I need to pay off the credit cards each month.
Minimum payments all totalled together: £701.33

This leaves me £570 a month for anything else. Usually paying off more than the minimum on the cards but then leaves me short for anything else so I end up having to use the credit cards.
A vicious circle.

Petrol for work: £40 a week - £160 a month.
Grocery shopping: £30 a week - £120 a month.

Leisure: I have a season ticket at the football. Usually bought around June/July time £250.
£30 a Saturday for a home game.
£100 if at an away game.
We buy train tickets in advance to take opportunity of the savings and I have a 26-30 rail card which helps. This includes travel / admission fee. These costs change so allowing £100 is an over-allowance.

I have car insurance renewal in May and MOT in September.

I have severely restricted my outgoings by stopping eating out so frequently, pub during the week and Sundays. I've got to the stage where there are days when I spend absolutely zero.

I'm now not in a situation of being able to get a balance transfer 0% card because of the high utilisation of the current credit cards.

Just after some wise words because I want to get debt free within 24 months so I can move on and start actually building up funds.

I got myself into this, so I must get myself out of it and I'm determined to do so.

Help! :j

Hey

Congratulations on the new job! That's a great payrise!

So - at the moment after your loan repayments and food/ petrol you have about £990 a month. You have credit card debt of £22.3k at an average of around 22% interest. The minimum payments on the cards are £701 of which £409 is interest - so your credit card debt comes down by £292 a month.

The interest rates are killing you. You need to whack that down as soon as possible. Ideas:

- do you need a car? Could you survive with public transport for a year or so?
- any chance of additional income? Private tutoring on a weekend? Lawn mowing?

Realistically you need to spend no money at all for a while - so no costs of going to the football. That gives you a bit of money to throw at the credit cards - more once the loan is cleared - and some chance to get cheaper credit to help out.

Karonher · 17 February 2019 at 8:34PM

The main area I can see you cutting back is going to be football. I have a season ticket and love away games, but it is taking up a lot of your spare money. Could you cut out away games until the end of the season and maybe cut back your spending at home games. If nothing else this would stop the debt increasing on some cards as it is at the moment.

Could you cut back a bit on petrol? The idea would be drive until you were on a good public transport route. It may take a bit longer to get there and back but it would help with savings.

AnonymousM · 17 February 2019 at 9:33PM

Hi,

Thanks for the responses.

When I was first made redundant I found a job that I started quite quickly after about 1.5 months or so. I did 7 days with them but left without notice due to it not being as described and was through a friend. I wasn't paid for these 7 days but it does amount to £546. Can I invoice for this despite it being from May 2018?

I do need the car as I do have travel with work sometimes for which I'm reimbursed etc.
I've even started allowing a longer time to get to work so that I can drive slower and hopefully use up less petrol rather than trying to rush there.
I've been at this job since July 2018 and love it. They are happy with my work and I've been able to demonstrate skill sets that weren't requested which has added value to their business. I am hoping for a quick pay-rise, maybe to £40,000 to start with - then the next step at £45,000 but that's all well and good. I don't have that right now.

I've applied for some evening delivery driver jobs. Once I hit the higher tax threshold I wonder if it'll be worthwhile but this money earnt could go straight to paying off the credit cards.

Absolutely cutting back on football is important too. Bearing in mind there are periods of the year where there is no football - May, June & July so increases on debt payment over those months. It is definitely somewhere I can reduce those costs. January just gone there was only 1 game so that worked out well.

I need to delve a bit into the loan and the contract agreement. I wonder if I overpay on that to get it cleared sooner than September then I will have that extra £385 to throw at the credit card debt.

I wonder if a DMP would be beneficial? In order to get the interest freezed and I could throw £1,000 at it each month, then once the loan is finished, increase the amount to £1,400. Bearing in mind from April our take home pay will increase slightly. I'm not paying into a pension fund at the moment as I wanted to sort this out first. Then re-enrol for 2020.

My only reservation of this is that we have been living together for 3 years now, these things don't last forever and housing arrangements may change later this year thus increasing rent/bill costs.

JayRitchie · 17 February 2019 at 9:46PM

What interest rate is the loan at? Is it as high as the credit cards? If not focus on paying off the cards.

I would write to your former employers and state that you cannot see a payment from them on your bank statement - please could they pay monies due or advise as to when they made payment. I wouldnt do this normally for 7 days in a job you left, but you need the money now.

So far as the tax rate on a second income goes the jump isnt as much as you might think as employees NI comes down from 12% to 2% at about the same level of income - in effect you pay an additional 10% tax. Not nice but its all money you can throw at the debts.

JCS1 · 17 February 2019 at 10:06PM

JayRitchie wrote: »

What interest rate is the loan at? Is it as high as the credit cards? If not focus on paying off the cards.

I would write to your former employers and state that you cannot see a payment from them on your bank statement - please could they pay monies due or advise as to when they made payment. I wouldnt do this normally for 7 days in a job you left, but you need the money now.

So far as the tax rate on a second income goes the jump isnt as much as you might think as employees NI comes down from 12% to 2% at about the same level of income - in effect you pay an additional 10% tax. Not nice but its all money you can throw at the debts.

Ni doesn't work like that though, OP would pay no NI on earnings up to £162 per week and then 12% until earnings reached £892 - which is unlikely to happen for a delivery night job. NI is per job, not over the 2 jobs combined.

So there would be tax to pay at 20%, and then 12% NI on anything over £162 a week.

theoretica · 18 February 2019 at 12:45AM

AnonymousM wrote: »

This leaves me £570 a month for anything else. Usually paying off more than the minimum on the cards but then leaves me short for anything else so I end up having to use the credit cards.
A vicious circle.

I think this is a clear sign that you need a better grasp on your spending. Know what you have coming up, plan a budget, don't overpay more than you can afford to. If you aren't ready to chop the cards up to stop spending on them, seal up all your cards into envelopes with very blunt messages to yourself on them, or freeze them into a block of ice in the freezer.

You have been in your new job for about 7 months. How have your finances/debts changed over those months? If your debts have got significantly less then great - carry on! If they have stayed the same or even got worse you need to change your finances.

AnonymousM · 19 February 2019 at 9:26PM

Thanks for the responses.

The debt has stayed the same really. A circle of overpaying, but then using again because it's left me short.

The one thing that is killing me is the credit card interests and I can't even do anything about them.
I almost feel like defaulting on 3 of them just to pay £800-£1000 off one each month in order to rid of this, but in the longer term this is possibly more harmful than good.

theoretica · 19 February 2019 at 11:18PM

AnonymousM wrote: »

Thanks for the responses.

The debt has stayed the same really. A circle of overpaying, but then using again because it's left me short.

The one thing that is killing me is the credit card interests and I can't even do anything about them.
I almost feel like defaulting on 3 of them just to pay £800-£1000 off one each month in order to rid of this, but in the longer term this is possibly more harmful than good.

So you are overspending. Even if you were just paying off the minimum payments and not using the cards your debt would be coming down by about £300 a month - steadily and slowly until the loan is paid off and you have more to thrown at the cards. Overpaying and then spending is just an excuse - if it were truly this it would be debt neutral (eg £200 both ways) but it sounds like you have been spending more than you overpay by and not seeing any debt reduction from your normal payments.

According to your first post you have £560 a month for 'everything else' you need to make sure you live within this. Stop all spending on the cards. Put aside what you need for car insurance etc and live on no more than the rest.

AnonymousM · 28 February 2019 at 7:34AM

Well it's pay day today.

So frustrating that you only really have one shot at this each month.

At time of paying this morning this is what the balances were:

Pay In = £2,323.04
Balance = £1,721.91

Overdraft - £601.13
Over £51.13

21.9% APR HSBC Balance = £4,049.25 - Paid £159.25
£49.25 over limit

26.68% APR Barclays = £5,765.65 - Paid £307.39
£115.65 over limit

22.20% APR Halifax = £4,498.92 - Paid £130.55
£1.08 credit available

19.17% APR Virgin = £8,226.99 - Paid 250
£26.99 over limit

Paid £847.19 off credit cards.

Left to pay on Direct Debits:

Tax £25.37
Vodafone £15
Loan £385.12
Rent £550

This leaves me at - £100.77

Overdraft interest and charges
Interest = £4.31
Over the overdraft limit = £20

With £424.92 of overdraft "available".

In for a tough ride this month to get this turned around.

The plan has to be to keep as close to £0 as possible in order to work my way out of the overdraft organically by not spending.

Paying Off Debt

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