How to best manage my debts? Advice please!

ciderlover · 24 October 2018 at 9:49PM

Hi All

I've allowed my debts to spiral out of control over the last 5 years or so. I have stupidly turned a blind eye as the credit cards rack up and have kept shifting debts around to new loans/cards. For about 6 months, between my wife and I we were earning less than the sum of all our repayments.

My wife has recently secured a new job and the repayments are now a little more manageable, however we have reached a touch over £35k in debt in total (down from around 40 about 6 months ago). I was wondering what would be the best method to continue repaying these debts? I am now determined to repay the debt as quickly as possible as both the overall and monthly amounts are making me worried sick.

Would it be best to finally consolidate everything into one monthly payment, but pay it over a longer term? I'm aware that this will likely come with a higher interest rate and higher overall payment, but will be much more manageable than present. Or is it best to carry on as we are, although money is currently very tight from month to month?

To add fuel to the fire we would like to move at some point over the next 2 years but have a help to buy mortgage, so would need to significantly increase our current one (50-60k) in order to get the house we want.

This is my first post, I have been lurking for a long time and have seen some inspiring stories, I just hope I can achieve near to what some others have!!

Please see my SOA below, any advice/suggestions/comments are most welcome (as long as they are helpful

)

Many Thanks

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SOA:

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned.................... 2

Monthly Income Details
Monthly income after tax................ 2040
Partners monthly income after tax....... 1050
Benefits................................ 137.6
Other income............................ 0
Total monthly income.................... 3227.6

Monthly Expense Details
Mortgage................................ 527.6
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 149
Electricity............................. 30
Gas..................................... 30
Oil..................................... 0
Water rates............................. 51
Telephone (land line)................... 19
Mobile phone............................ 80
TV Licence.............................. 14
Satellite/Cable TV...................... 29
Internet Services....................... 6
Groceries etc. ......................... 250
Clothing................................ 50
Petrol/diesel........................... 200
Road tax................................ 20
Car Insurance........................... 25
Car maintenance (including MOT)......... 40
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 200
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 5.5
Buildings insurance..................... 7
Contents insurance...................... 7
Life assurance ......................... 15
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 20
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 40
Total monthly expenses.................. 1815.1

Assets
Cash.................................... 200
House value (Gross)..................... 200000
Shares and bonds........................ 0
Car(s).................................. 4000
Other assets............................ 0
Total Assets............................ 204200

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 126033...(527.6)....2.5
Total secured & HP debts...... 126033....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Loan...........................16867.....289.9.....3.3
Loan...........................6958......289.9.....2.8
Credit Card....................6645......160.......0
Credit Card....................5866......70........0
Total unsecured debts..........36336.....809.8.....-

Monthly Budget Summary
Total monthly income.................... 3,227.6
Expenses (including HP & secured debts). 1,815.1
Available for debt repayments........... 1,412.5
Monthly UNsecured debt repayments....... 809.8
Amount left after debt repayments....... 602.7

Personal Balance Sheet Summary
Total assets (things you own)........... 204,200
Total HP & Secured debt................. -126,033
Total Unsecured debt.................... -36,336
Net Assets.............................. 41,831

enthusiasticsaver · 24 October 2018 at 10:06PM

The best method of paying your debts down is to do as you have done and continue paying as much as possible to get the debt down. Consolidation would be a big mistake and usually ends up with even higher debt as once consolidated many go on to spend again on credit. Were those earlier loans consolidation loans?

Your loans are on a fairly good rate. Are the credit cards on 0%? Your soa shows money is not that tight. You have a £602 surplus each month on paper. Do you actually have that in reality? If not, a spending diary may be the wY to go to see where you are overspending. As an example with 2 kids I very much doubt presents and entertainment are 0. The soa should cover all spends.

Guybrush_Threepwood · 29 October 2018 at 4:09PM

Hello.

Your unsecured loans appear to be on very low rates and your credit cards are interest free. I think you'd be worse off in the long term if you consolidated, as you rightly say, the interest rate will likely be higher.

With this debt clearly weighing on your mind, I'd say the last thing you should be looking at is moving home. My advice would be to forget this for now and focus on reducing your unsecured debts first.

You say money is tight from month to month, but you have a £600+ surplus in your SOA above. Where does the £600 go? Some advice I can offer:

- Whilst your credit cards are interest-free, make only the minimum payments and pay as much as possible on to the unsecured loans.

- Call the lenders, see if there is any way you can stretch out the loan terms and reduce the monthly payments.

- Do you need two cars (presumably also two lots of car insurance, car maintenance and so on)?

ciderlover · 29 October 2018 at 6:52PM

Thanks for the replies, yes, the earlier loans were for consolidation which is why I'm more than hesitant to borrow again and stretch this out even longer. I meant to post a more updated SOA, it's more around the £200 p/m mark surplus with a little more on entertainment, kids clubs, Xmas saving, etc.

I believe I have around 12-18 months of interest free payments left on the cards, so I will continue to pay minimum on those. I would love to get rid of a car but both of our jobs require them unfortunately. They're both fairly high mileage and I can see one needing to be replacing within the next 24 months!

The main headache for me is the length of time we will spend paying this back, so I'd like to keep the payments high but have enough leftover to live 'comfortably'. I guess I'm asking for the moon on a stick, and then some

Thanks

ciderlover · 29 October 2018 at 6:53PM

What is the best way to keep a spending diary, anything you can recommend please?

Willing2Learn · 29 October 2018 at 6:59PM

I literally kept a diary, and wrote down every time I spent money, whether it be a chocolate bar, a latte, a newspaper or whatever. It got recorded in my diary. That way, I could find out my true spending patterns and could update my SOA accordingly. Example: It turned out I was spending £150/month in coffee shops!!

RyanEzio · 31 October 2018 at 9:45PM

Willing2Learn wrote: »

I literally kept a diary, and wrote down every time I spent money, whether it be a chocolate bar, a latte, a newspaper or whatever. It got recorded in my diary. That way, I could find out my true spending patterns and could update my SOA accordingly. Example: It turned out I was spending £150/month in coffee shops!!

It's crazy how something small like a coffee can add up.

I got one of those pod machines, coffees are almost just as good.

Save a fortune!

Mnd · 1 November 2018 at 11:49AM

And look at your mobile phone payments, you could more than halve these, and it's saying you have cash of £200, try to build this up to £1000 as an emergency fund to prevent using cards for the unexpected outgoings that do come along

tlc678910 · 1 November 2018 at 12:20PM

Hi,
You have done amazingly well to reduce your debt by 5k in 6 months! Keep going like that aiming to reduce the debt by 1k each month which your statement of affairs shows is possible. Your debt free date will be the number of months of your debt in KKs so currently 35 months!

Paying just over 1k a month to your debts it will take you over a year to pay off the credit cards (as some of the money will go to the loans) so I would actually do the opposite to previous suggestion and focus on the cards while paying the required amount on the loans as when you lose your 0% offers the cards will go to probably 20% interest. It could be a gamble to bank on new 0% offers for that much debt.

Good luck whatever approach you go for.

ciderlover · 6 November 2018 at 10:05AM

Thanks guys. I'm not the biggest Costa fan, 99% of my coffee is instant stuff I have at work. Granted it's horrible but hey it's free!! I think I need to start keeping a diary, we're only a couple of weeks since payday and already we only have around £200 left. I'm keen to clear everything asap but mindful that throwing around £1k a month at the debts is making things much tighter.

One thing I was considering was carrying on as is for 12 months, reviewing and then potentially refinancing into one loan for a slightly longer period, say 3 years, when the amount should be nearer £25k. This will work around the 0% cards suddenly leaping up and biting me and will allow for breathing space. Does this sound sensible? I can already obtain a loan for that amount on a 3% rate and it would save around £500 p/m. I'm not worried about the debt hanging around for a little longer, now we have more of a hold on it, as long as it's more affordable.

-taff · 6 November 2018 at 11:26AM

The chances of you getting a 3% loan are very slim because they work on affordability. You owe 36k, if you applied for a loan to consolidate, they would see it as you owing 72k, as there's no guarantee you'd pay off what you owe and you would fail the affordability on your wages.

Consolidation loans generally do not work. the issues that statred the debt are not adressed so you borrow, then you pay off, then you keep spending. Until the original source of overspending is addressed, there's no point in taking out more credit.

What your proposing is getting yourself into debt for longer, and you're trying to borrow your way out of it. It doesn't work.

How to best manage my debts? Advice please!

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