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  • FIRST POST
    • lookingforadvice1
    • By lookingforadvice1 9th May 18, 12:52 PM
    • 2Posts
    • 0Thanks
    lookingforadvice1
    1st post - would appreciate any help and advice
    • #1
    • 9th May 18, 12:52 PM
    1st post - would appreciate any help and advice 9th May 18 at 12:52 PM
    Hi All,

    This is my first post, I will try to give a summary of how we got into this position.

    In 2012 myself and my then girlfriend got engaged - at the time we had about 3k of debt between us/ Over the next year we saved up 12k for our wedding and didn't use any credit to fund wedding however we did use borrow 3k for the honeymoon, increasing our debt to 6k.

    After the honeymoon we decided to save for a house. Over the next 2 years we saved over 12k and my parents lent us an additional 5k ( total debt now 11k)

    We moved in Jan 2016 into the new home - the house needed some improvements so we got a loan out for 15k (17.5K) with interest. Looking back this was huge mistake now.

    My wife really wanted children straight away, but I wanted to see some more of the world first,
    so we comprised on a 4 week trip to the USA and Canada in August 2016 ( another 2k on a credit card) and to start trying for a family in September. Total debt was now circa 28k, Although rather large - I thought this was manageable on a joint income of 3500 a month after tax with the credit cards that were on Interest free promotions.

    We started trying for baby in September - in my head I didn't think it would happen for 3-6 months so we could start trying to save again, but the first month of trying my wife fell pregnant.

    This is where our financial difficulties started to appear. My wife was severely ill from 2 imonths into her pregnancy requiring frequent hospitalisation due to hyperemesis gravidarum ( severe morning sickness) so her wages fell from 1400 a month to statutory sick pay which crippled us as well as trying to buy baby stuff, I just put any expenses we couldn't afford onto credit cards- the credit cards companies had increased our limits frequently in the last 2 years. We had the baby and then my wife was only on statuary maternity, by the end of my wife maternity we had amassed even more credit card debt, now in the region of 19k. the loan has reduced to 9k

    My wife is now back at work (part time) and we are in surplus again per month. but the credit card promotional balances had ended. So I planned to apply for 2 new ones to shift the debt with a balance transfer. To my horror, both my applications were declined. Both our credit ratings were usually comfortably in the 900s before my wife had the baby, but when I checked after the applications mine was 845! even though I have never missed a payment.

    I think I have 4 options which I have listed below and would appreciate any comments advise on which will be the best strategy.

    1. Use the £500 a month to pay down the credit cards. I can put up without any luxuries, but I don't want to deprive my wife and daughter of things. (4-5 years to clear debts)

    2. Wait 16 months and remortgage to clear the debts( assuming house price at least stays the same and assuming the bank will approve this?

    3. Sell the house and pay off all the debt- move in with my parents for 3-6 months and use the remaining 30k for a deposit on a new property ( a lot of hassle especially with a young child)

    4. Take out a secured loan for 17k to clear the credit card debt. I am least keen on this option.

    I have pasted the SOA below- it says we have about £650 surplus- but it feels like less than £500 some months

    [font=courier new]Statement of Affairs and Personal Balance Sheet

    Monthly Income Details

    Monthly income after tax................ 2100
    Partners monthly income after tax....... 975
    Benefits................................ 89
    Other income............................ 0
    Total monthly income.................... 3164


    Monthly Expense Details

    Mortgage................................ 495
    Secured/HP loan repayments.............. 0
    Rent.................................... 0
    Management charge (leasehold property).. 0
    Council tax............................. 130
    Electricity............................. 50
    Gas..................................... 35
    Oil..................................... 0
    Water rates............................. 40
    Telephone (land line)................... 0
    Mobile phone............................ 30
    TV Licence.............................. 10
    Satellite/Cable TV...................... 0
    Internet Services....................... 25
    Groceries etc. ......................... 350
    Clothing................................ 50
    Petrol/diesel........................... 90
    Road tax................................ 2
    Car Insurance........................... 37
    Car maintenance (including MOT)......... 0
    Car parking............................. 0
    Other travel............................ 0
    Childcare/nursery....................... 160
    Other child related expenses............ 0
    Medical (prescriptions, dentist etc).... 0
    Pet insurance/vet bills................. 0
    Buildings insurance..................... 10
    Contents insurance...................... 0
    Life assurance ......................... 0
    Other insurance......................... 0
    Presents (birthday, christmas etc)...... 150
    Haircuts................................ 25
    Entertainment........................... 50
    Holiday................................. 0
    Emergency fund.......................... 0
    Total monthly expenses.................. 1739



    Assets

    Cash.................................... 0
    House value (Gross)..................... 210000
    Shares and bonds........................ 300
    Car(s).................................. 4500
    Other assets............................ 0
    Total Assets............................ 214800



    Secured & HP Debts

    Description....................Debt......Monthly.. .APR
    Mortgage...................... 148000...(495)......1.56
    Total secured & HP debts...... 148000....-.........-


    Unsecured Debts
    Description....................Debt......Monthly.. .APR
    cc.............................13000.....300...... .20.9
    cc.............................4000......90....... .15.9
    cc.............................2000......55....... .18.9
    loan...........................9000......324...... .7.9
    Total unsecured debts..........28000.....769.......-



    Monthly Budget Summary

    Total monthly income.................... 3,164
    Expenses (including HP & secured debts). 1,739
    Available for debt repayments........... 1,425
    Monthly UNsecured debt repayments....... 769
    Amount left after debt repayments....... 656


    Personal Balance Sheet Summary
    Total assets (things you own)........... 214,800
    Total HP & Secured debt................. -148,000
    Total Unsecured debt.................... -28,000
    Net Assets.............................. 38,800




    Many thanks for any help.
Page 1
    • Dobbibill
    • By Dobbibill 9th May 18, 1:47 PM
    • 3,398 Posts
    • 4,383 Thanks
    Dobbibill
    • #2
    • 9th May 18, 1:47 PM
    • #2
    • 9th May 18, 1:47 PM
    Hi All,

    This is my first post, I will try to give a summary of how we got into this position.

    I think I have 4 options which I have listed below and would appreciate any comments advise on which will be the best strategy.

    1. Use the £500 a month to pay down the credit cards. I can put up without any luxuries, but I don't want to deprive my wife and daughter of things. (4-5 years to clear debts) This is your solution with amendments

    2. Wait 16 months and remortgage to clear the debts( assuming house price at least stays the same and assuming the bank will approve this? No - do not move unsecured debt to secured debt - if you were to have a run of bad luck, lose job etc again you are then risking the roof over your head.

    3. Sell the house and pay off all the debt- move in with my parents for 3-6 months and use the remaining 30k for a deposit on a new property ( a lot of hassle especially with a young child) No - this is not necessary, you have a surplus in your budget so you need to throw every spare penny at the debt.

    4. Take out a secured loan for 17k to clear the credit card debt. I am least keen on this option. No - as above.

    I have pasted the SOA below- it says we have about £650 surplus- but it feels like less than £500 some months

    [font=courier new]Statement of Affairs and Personal Balance Sheet

    Monthly Income Details

    Monthly income after tax................ 2100
    Partners monthly income after tax....... 975
    Benefits................................ 89
    Other income............................ 0
    Total monthly income.................... 3164


    Monthly Expense Details

    Mortgage................................ 495
    Secured/HP loan repayments.............. 0
    Rent.................................... 0
    Management charge (leasehold property).. 0
    Council tax............................. 130 is this over 10 months, ask your council to do it over 12.
    Electricity............................. 50have you done a comparison lately to see if you are on the best deal?
    Gas..................................... 35 as above - make sure you are on the best tariff.
    Oil..................................... 0
    Water rates............................. 40 is this metered or over 10 months - as above ask for 12 months if it is.
    Telephone (land line)................... 0
    Mobile phone............................ 30
    TV Licence.............................. 10 this is £12.37
    Satellite/Cable TV...................... 0
    Internet Services....................... 25
    Groceries etc. ......................... 350 this is alot for 2 adults, 1 child - switch brands/stores and batch cook from scratch - see the old style board.
    Clothing................................ 50 minimise this to bare essentials until you are debt free.
    Petrol/diesel........................... 90
    Road tax................................ 2
    Car Insurance........................... 37
    Car maintenance (including MOT)......... 0 you never buy wipers, tyres, pay for an MOT, oil change etc
    Car parking............................. 0
    Other travel............................ 0
    Childcare/nursery....................... 160
    Other child related expenses............ 0
    Medical (prescriptions, dentist etc).... 0
    Pet insurance/vet bills................. 0
    Buildings insurance..................... 10
    Contents insurance...................... 0 is this covered in your buildings ins above?
    Life assurance ......................... 0
    Other insurance......................... 0
    Presents (birthday, christmas etc)...... 150 this is too much, cut back
    Haircuts................................ 25 this is alot for haircuts - go more weeks between visits and/or change to using a local college
    Entertainment........................... 50 find more free things to do
    Holiday................................. 0
    Emergency fund.......................... 0as a homeowner, you need something in here
    Total monthly expenses.................. 1739



    Assets

    Cash.................................... 0
    House value (Gross)..................... 210000
    Shares and bonds........................ 300
    Car(s).................................. 4500
    Other assets............................ 0
    Total Assets............................ 214800



    Secured & HP Debts

    Description....................Debt......Monthly.. .APR
    Mortgage...................... 148000...(495)......1.56
    Total secured & HP debts...... 148000....-.........-


    Unsecured Debts
    Description....................Debt......Monthly.. .APR
    cc.............................13000.....300...... .20.9 tackle this one first as it has the highest APR.
    cc.............................4000......90....... .15.9
    cc.............................2000......55....... .18.9
    loan...........................9000......324...... .7.9
    Total unsecured debts..........28000.....769.......-



    Monthly Budget Summary

    Total monthly income.................... 3,164
    Expenses (including HP & secured debts). 1,739
    Available for debt repayments........... 1,425
    Monthly UNsecured debt repayments....... 769
    Amount left after debt repayments....... 656


    Personal Balance Sheet Summary
    Total assets (things you own)........... 214,800
    Total HP & Secured debt................. -148,000
    Total Unsecured debt.................... -28,000
    Net Assets.............................. 38,800




    Many thanks for any help.
    Originally posted by lookingforadvice1
    See my comments in red.

    Cutting back and doing free things is not depriving your OH or LO. As a family you are a team and as such all need to make small sacrifices now for the future.

    Throw every penny at the debt with the highest APR as well as the minimum payment. It will start to chip away quite quickly with the excess you have in the budget if this is accurate.

    All the best
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  • National Debtline
    • #3
    • 9th May 18, 2:18 PM
    • #3
    • 9th May 18, 2:18 PM
    Hi there and welcome to MSE,


    A good SOA is essential here. You maybe able to make some cut backs, but you also need to ensure you have budgeted sufficiently for things as well. Emergency funds, MOTs, insurances are all essential as a home/ car owner so make sure you start to have a regular budget for these (otherwise there is a risk you will revert back to using credit again, which we want to avoid). If you feel that you don't have quite as much surplus as your budget is showing, then check your bank statements and receipts, you may have missed or under budgeted for something.


    Moving house is expensive (solicitors, estate agents and then stamp duty when you buy a new house) so this may not give as much of a yield as you think, and isn't actually necessary in your situation. I also think that turning unsecured debt into secured debt is risky. You can speak to an independent financial advisor, but I agree with Dobbibill that if your circumstances were to get worse, it idea would then risk the house.


    It would appear that overpaying is a good option right now, and then potentially looking into new financial deals in 12 months time when the declined searches come off your credit file.


    Laura
    @natdebtline
    We work as money advisers for National Debtline and have specific permission from MSE to post to try to help those in debt. Read more information on National Debtline in MSE's Debt Problems: What to do and where to get help guide. If you find you're struggling with debt and need further help try our online advice tool My Money Steps
    • Mumoffourkids
    • By Mumoffourkids 9th May 18, 3:14 PM
    • 701 Posts
    • 3,649 Thanks
    Mumoffourkids
    • #4
    • 9th May 18, 3:14 PM
    • #4
    • 9th May 18, 3:14 PM
    The two main areas I can see that you can cut back on are groceries and presents.

    I have six kids and I spend £400 a month on food for all of us. This includes packed lunches for me and four of the kids, nappies for two children and all cleaning stuff, washing stuff and toiletries.

    In addition, I budget £150 for presents each month but my family is far bigger than yours. I also don't spend all of that on presents. It goes on presents for birthdays and christmas for my kids, presents for parties that my kids get invited to, christmas food and outings, presents for family for christmas and birthdays and I still manage to have money left. My eldest daughter is 16 on Saturday and yes I have spent a bit more on her this year than I would do normally but it is still within my present budget.

    If you don't feel like you have the £650 spare each month, then you need to keep a spending diary for everything you spend on. This will then show you where you are spending money.
    Total debt Dec 2017 £23090.83
    SEP 2018 £0 100% paid
    Emergency fund £257.38/£600
    Total Savings £1672.07
    • lookingforadvice1
    • By lookingforadvice1 10th May 18, 9:51 AM
    • 2 Posts
    • 0 Thanks
    lookingforadvice1
    • #5
    • 10th May 18, 9:51 AM
    • #5
    • 10th May 18, 9:51 AM
    Thanks all for the replies,

    3 monthly expenses I missed were
    £9.99 Netflix
    £3.00 Xbox Live
    £12.00 Charity direct debit.

    In response to my SOA -

    Council tax............................. 130 ....... this is over 12 months
    Gas and Electric tariff ..... runs out in June. will do comparison this month
    Water - is not metered
    Groceries etc. .......... 350 - I agree I can probably reduce this to 300- I do make a lot from scratch, and very rarely eat out.
    Car maintenance (including MOT) ...... My brother in law owns a garage - and doesn't charge me for small expenses
    Contents insurance........... I don't have contents insurance
    Presents (birthday, christmas etc)...... 150 My wife has a large immediate family and I've also included wedding and christening gifts within this figure
    Haircuts.................. 25 This is combined - I get a haircut every 5 weeks by wife every 3 months.


    The issue that is most bothering me is the thought of paying interest on the credit cards as I have always been able to balance transfer.
    I understand that this will reduce the faster I can pay off the balances, but at what point will I be deemed less risky to credit companies.... 15k? 10k? 5k? .

    Many thanks again
    • Oakdene
    • By Oakdene 10th May 18, 10:00 AM
    • 2,443 Posts
    • 8,836 Thanks
    Oakdene
    • #6
    • 10th May 18, 10:00 AM
    • #6
    • 10th May 18, 10:00 AM
    Thanks all for the replies,

    3 monthly expenses I missed were
    £9.99 Netflix
    £3.00 Xbox Live
    £12.00 Charity direct debit.

    In response to my SOA -

    Council tax............................. 130 ....... this is over 12 months
    Gas and Electric tariff ..... runs out in June. will do comparison this month
    Water - is not metered
    Groceries etc. .......... 350 - I agree I can probably reduce this to 300- I do make a lot from scratch, and very rarely eat out.
    Car maintenance (including MOT) ...... My brother in law owns a garage - and doesn't charge me for small expenses
    Contents insurance........... I don't have contents insurance
    Presents (birthday, christmas etc)...... 150 My wife has a large immediate family and I've also included wedding and christening gifts within this figure
    Haircuts.................. 25 This is combined - I get a haircut every 5 weeks by wife every 3 months.


    The issue that is most bothering me is the thought of paying interest on the credit cards as I have always been able to balance transfer.
    I understand that this will reduce the faster I can pay off the balances, but at what point will I be deemed less risky to credit companies.... 15k? 10k? 5k? .

    Many thanks again
    Originally posted by lookingforadvice1
    You should be able to get that figure to around or below £200. I currently spend £130ish a month for me & my teenage daughter, & my son every other weekend. Could you shop at a cheaper supermarket?
    Dwy galon, un dyhead,
    Dwy dafod ond un iaith,
    Dwy raff yn cydio’n ddolen,
    Dau enaid ond un taith.


    • marliepanda
    • By marliepanda 10th May 18, 10:10 AM
    • 6,893 Posts
    • 14,986 Thanks
    marliepanda
    • #7
    • 10th May 18, 10:10 AM
    • #7
    • 10th May 18, 10:10 AM
    Get rid of the charity DD. Charity begins at home. Youre spending £144 a year on something you cannot afford with 28k of debt.
    • Golightly72
    • By Golightly72 10th May 18, 11:13 AM
    • 92 Posts
    • 324 Thanks
    Golightly72
    • #8
    • 10th May 18, 11:13 AM
    • #8
    • 10th May 18, 11:13 AM
    Good advice on the SOA, I would just say that if you do have £500 to throw at the debts, I would clear credit card 3 first, with the £2000 balance, and a not much lower APR than credit card 1, which will take so much longer to shift.

    It would be gone in 4 months; if you keep the card open, depending on which one it is you may then get a decent 0% transfer offer that you can at least shift some of the higher APR debt to.

    Then shift credit card 2, so in 12 months you could have two credit cards gone and hopefully some better offers, either from those cards, or you might be a better prospect for some better offers.

    I wouldn't worry too much about the loan for now - let it tick on until you have cleared the cards.
    • chelseablue
    • By chelseablue 10th May 18, 12:59 PM
    • 2,633 Posts
    • 3,058 Thanks
    chelseablue
    • #9
    • 10th May 18, 12:59 PM
    • #9
    • 10th May 18, 12:59 PM
    We're also a family of three, 2 adults and a 3 year old son.

    I shop in Aldi and spend about £200 a month, do you have a Aldi or Lidl near you?
    Mortgage starting balance £231,000
    Mortgage after Year 1 £225,000
    Mortgage after Year 2 £218,000
    • ReadingTim
    • By ReadingTim 10th May 18, 1:24 PM
    • 3,104 Posts
    • 4,588 Thanks
    ReadingTim
    I can put up without any luxuries, but I don't want to deprive my wife and daughter of things. (4-5 years to clear debts)
    Originally posted by lookingforadvice1
    No. As an entire family you need to learn to live within your means. No-one's being deprived - you've got food, shelter, heat, clothing etc, but money doesn't grow on trees and you can't always have everything your heart desires, especially if costs money to buy it.
    • zippygeorgeandben
    • By zippygeorgeandben 10th May 18, 8:12 PM
    • 945 Posts
    • 1,292 Thanks
    zippygeorgeandben
    You may think that ReadingTim is being a little harsh but I second what he says. What actually is deprivation?
    You also state 'This is where our financial difficulties started to appear.' midway through your post. You should analyse your position before you got into difficulties. I can't speak for everyone on MSE but you had to borrow money to fund honeymoon etc because you didn't have the funds so you created financial difficulty in 2012.
    Make this be your lightbulb moment and you might find that not being able to shift balances help you get your head out of the sand.
    Good luck
    Savings End October 2018 £2240.13
    September 2018 £986.09
    October 2018 £1254.04
    November 2018
    December 2018
    January 2019
    • Magpie100
    • By Magpie100 12th May 18, 3:37 PM
    • 122 Posts
    • 309 Thanks
    Magpie100
    And please - get some Contents insurance, immediately. With £28000 worth of debt you wouldn't be able to afford to replace anything lost, stolen, broken or damaged in your house. It won't costs much but it is essential - take £50 off the presents budget if necessary.
    • JayRitchie
    • By JayRitchie 12th May 18, 11:55 PM
    • 43 Posts
    • 51 Thanks
    JayRitchie
    Hi

    It seems to me you are in the horrible position of having a just about sustainable cashflow without doing anything different, but will be in huge trouble as soon as something goes wrong - such as a health problem, house repairs or needing a new car. Just read the threads on here to see how easily that can happen.

    Its clear how committed to your wife and daughter you are. Seriously - young children don't need much cash spent on them and don't miss out on things. Different when they are older.

    As for your options:

    1) use £500 a month to clear the cards - you think this will take 5 years.

    ok - not sure how you have calculated this. At present you pay £770 a month in repayments. If you keep up this rate on my calculations (so when the loan finishes reassign this amount to credit cards) you would be debt free in 50 months. You can probably better this as the overall debt comes down by getting better interest rates - you would pay £38,000 to clear £28,000 of debt.

    The bad part about this is how slowly the debt reduces. After 2 year you still owe a little over £16k. At some point will you need a new car? Do you need a car to work or live? Looks a bit frightening to me, although I think you have a reasonable discretionary income remaining.

    If you pay an extra £500 a month you have a balance after 24 months of £2,000. Your repayments would come down to £324 a month for a further 6.5 months - leaving you with an extra £445 a month above the do nothing option - and of course you are £790 a month better off after this - about 18 month. That looks a lot more feasible.

    Your budget looks tight in some areas (clothing for example - what sort of jobs do you do?). Ok for a while but probably not sustainable with office jobs. However with £50 a month entertainment budget you can cut the presents of £150 a month. Young children don't notice and relatives need to be aware of how perilous your position is. Your groceries budget can be cut by £150 a month. Hard - but not required long term. You can tough it out. Given you will have no social life you have plenty of time to meal plan and batch cook. With a bit more focus on saving every penny you can get to £900 a month for additional relayments.

    Now you need to increase earnings - wife works a few shifts at the weekend while you focus on your daughter? Some evening work? Gardening over the summer months? Anything you can sell?

    Lets see what happens if you pay an extra £1000 a month. After 15 months Your debt is £4,800. That even allows for a bad month when you can only afford an extra £300. You are only left with the loan - so for a really tough 15 months you end up over £400 a month better off for the next 35 months compared to the do nothing option. My bet is that you could do this, and it would leave spare money for the inevitable household bills which come.The overall cost of this is £31,500, leaving enough spare cash from doing nothing to buy a replacement car.

    Or if you cant face being that tough put an extra £1,000 a month in the pot for 6 months then an extra £500 for the following 14 months. After 20 months you will have cleared the cards and just have a loan balance of £3k outstanding. Not that bad for a couple who have bought a house and had a baby is it? As the debt comes down you'll be able to get better rates and beat this figure.

    2) Remortgage. Seems a risk waiting - why deny yourself cashflow when you will really appreciate some money to spend with your daughter over many years? The interest you will pay on the cards and then the mortgage is horrible.

    3) Sell house and move in with parents and then rebuy. Dont do this - you seem to be in an area with increasing house prices. With a lower deposit you will get worse interest rates. I'm a bit concerned you may struggle to get a mortgage. Seriously - don't end up renting for years to avoid short term pain. Think of yours and your childs future.

    4) secured loan - nah. Risk your home and just delay paying again. I'm concerned about major repairs when you may need this option for an emergency.

    Look - paying the extra £1000 a month, even £500 a month needed to clear these debts is no tougher than people put up with to save for a deposit to buy a house. Have a really tough year - the future will be far brighter for it.
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