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Overwhelming debt and can't see a way out(23 Posts)
We have a massive debt (cards/loans etc) although both of us earn good money. DH is on a plan to repay his but I struggled on with my credit card debts wanting to keep my credit rating (which is now "fair") and I've just about managed to keep up minimum payments but I'm about to NOT be able to do that anymore. We have very little to live off each month and worry about feeding kids etc. We haven't defaulted on our mortgage at all and have a substantial amount of equity in our house but understandably, no-one will lend us any money against it. Ideal situation would be to sell the house, pay off the debt entirely and then downsize to a smaller house...however, we don't have quite enough to be able to go zero mortgage and no-one will lend us the shortfall to buy a house/flat - even a tiny mortgage - again, understandable. We've thought about moving out, keeping our house (renting it off) and renting a smaller one (this would give us a big increase in money on a monthly basis as our house is large, worth a fair amount of rent - which we could use to pay off the debts). However, due to dh's poor credit rating (and because he's the biggest earner) we don't think anyone will rent to us as we've been told that by the estate agents.
We are caught in a catch 22. It's so frustrating as if we could sell and buy a smaller place we would be debt free and in a much better place.
I have head down as I'm sure someone will feel it's all our fault for getting in to this mess...yes, we've made some stupid decisions but actually a lot of where we are is down having to care for my parents....not going into the details here but suffice to say, we are not in this mess because we've been spending stupidly.
Neither of us are sleeping, life is shit and I can see no way out and am becoming increasingly depressed about this. Any thoughts. Thank you.
if you have a poor credit rating, the way to rent is by paying six months in advance - I realise that may not help. Be aware of the risks and costs of renting out your own place; you'll need to change the mortgage or have permission to let, costly insurances, complete clean and fix, agents fees, etc etc. And if it doesn't have a suitable EPC rating you can't rent it at all.
have you spoken to organisations such as stepchange? Also are your lenders willing to freeze debts.
there IS a way out - there always is - but you need some qualified advice.
Thanks for your response. No we won't be able to pay 6 months up front. I can't believe they won't allow us to release some equity from the house as if we could pay off the debts, we'd be able to cope well within the budget (we are no longer caring for parents) so our outgoings have massively reduced too. However, no-one we've contacted will consider it so far. I'd much rather NOT sell the house but I see no other way at the moment.
I thought letting agents only had very limited Info from credit checks.
I thought they could only see bankruptcy or ccj's.
I second calling StepChange or PayPlan. They will help you look at you finances and suggest ways that might help. I have used PayPlan, and although my debts are smaller, I was struggling every month to even make the minimum payment. I'm now in a debt management plan and pay a fixed affordable amount every month which os fairly shared between all my creditors. Most have frozen the interest. My credit rating is shot though but tbh obtaining more credit is not something I would even want to consider at the moment anyway. Pop across to the DebtFreeWannabe board on MoneySavingExpert and you will find plenty of people in similar situations.
Also. If your credit rating is bad enough that nobody will lend you money. What's to lose by contacting one of the debt charities and paying a smaller amount on all type debts.
Regroup, be frugal. In 6 years all the credit file marks will be gone as long as you haven't got a ccj.
I don't see any point struggling to pay the minimums on CC while you are at risk of not being able to pay the mortgage ( and other priorities such as council tax)
Are you sure you can't remortgage? I was up to my eyeballs in debt and was turned down by several banks when I applied to remortgage. I went to a broker (London and Country but most brokers are similar) and they knew the whole of the market and which lenders would accept a high level of debt. It took 8 weeks from offer to completion and all the debt is now clear.
OP head over to the debt free wannabe part of the money saving expert. If you complete a SOA (statement of affairs, they will give you the template), which details your i comings, outgoings and debts they will be able to advise you how to get everything sorted. Good luck x
Lettings agents seem to vary in the level of scrutiny they put your finances under op. Where we rent now we had to pay for credit checks and references. I have a crap credit rating (from not having had any rather than defaults etc) but dp's is good so it's been fine. A friend of mine is the lower earner (part time) but had the better credit rating, plus her dh was only in short term contract work and they were fine. Some ll look at more than just credit rating, good income, stability, kids in school etc.
If you are struggling to put food on the table protecting your credit rating comes second so contact step change or the CAB about dealing with your creditors to reduce your monthly outgoings?
I have a terrible rating and have never failed a credit check to rent. I believe they only see CCJs and bankruptcies. Good luck
You can now get up to 7500 pounds per year completely tax free by letting a room in your house, assuming you also remain living there. No big contract tie ins or moving costs. Do you have a spare room (or can you make one temporarily spare?).
How much debt have you got?
As others have said, unless you have CCJ's or have been bankrupt then renting shouldn't be a problem.
Having said that, renting your house out and you renting somewhere else is a really bad idea for several reasons, this biggest of which is your liabilities as a landlord.
If you can't remortgage then you couldn't get a BTL mortgage and it's quite likely you'd be refused consent to let so you'd potentially be renting the property without permission.
If the tenants don't pay the rent you'll be worse off as you'd have to cover your rent and the mortgage and that's before all the legal/ regulatory obligations you must adhere to as a landlord, many of which come at a cost.
On the face of it wouldn't it make more sense to sell up, pay everything off then rent for a while until you build up your nest egg or repair your credit rating enough to get back on the property ladder?
I know it's not ideal if prices are rising but if it's that or go bankrupt then it's probably the better option.
Debts can be a never-ending money pit esp credit card ones and I assume you wouldn't get a loan to cover it if you have bad credit references.
Agree it sounds like you need to downsize and get your debts under control. If you still need a small mortgage a broker should be able to find you one. Dsis was in a similar situation but she found one with Nationwide. Could you move to a slightly smaller house in a cheaper area? I'd try to still stay on the property ladder if possible.
Also, try talking to your bank. We have a number for people to call if they're in financial difficulties. They might be able to advise and look at debt restructuring.
Are you based in Scotland or England there is different ways of dealing with debt in both countries
Hi I would like to echo what PP have said. There is always a way out. Might be tough but you can change your circumstances for the better. I used Christians Against Poverty. A charity recommended by Martin Lewis on his moneysaving expert site. They are excellent. You do not have to be religious or Christian just in debt for them to help. So far for me and my children they have organised a payment plan, negotiate freezing interest and act as a go between. All free of charge. They also bring food boxes round. They stocked my freezer before the Summer holidays with child friendly food. They offered us a holiday. They give tickets for pantomimes, parties, etc. They are very respectful, kind and efficient. I ve paid off £2500 of my debt. Still got £7500 to go but I sleep at night now and feel fully supported. They help 20,000 people a year. They know what they re doing. Good luck.
I also second speak to Step Change, they are wonderful. We've also been there OP. Money Saving Expert is very good forum to keep you focus on debt free wannabe, very good support group. I also like "Old style' on MSE for advise and lots of tips.
I know for fact that debt is awful, it affected my relationship with my partner, I hid my ( huge) debt ),it affected my eating, sleeping and created anxiety, and nothing is worth your health.
Remember that everything passes, good luck
I so get what you have said I am same boat but there are ways and yes it's embarrassing mortifying etc I today laid my life out to credit card companies but was honest I also looked selling /renting house but you don't have to do it ... I'm still feeling terrible and ashamed but know I can't do it ... I would love to talk to you I did the most positive step today and I have saved so much money on interest and I did it myself and you can as well 👍
I rented 2 of my rooms out when my ex left me, it allowed me to keep paying the mortgage till we sold.
It wasn't ideal but it was a means to an end. Luckily I had 2 nice girls both in their early 20's and it worked well. I did it for 6 months.
First off all breath!
My husband lost his firm, last year, I can still remember when he called in chock and said it was closed down. No more money coming in at all with 2 kids in boarding school and not much in cash.
So I feel with you.
But- and this is really important. You need to calm down.
I did meditation - not right away- I stayed in bed and thought how on earth it would be sorted... By someone else. So did my husband...
Now- you can't waist a year as we did! No time!
Calme app- is great and free! Use it!
Apple store- download Calme app now!
Free- Forgive your self, others, loving kindness- scroll down and you will find the free ones. Do Not spend money on buying the app!
Then buy this book- RICH DAD AND POOR DAD- By Robert T Kiyosaki, read it! Buy also TOTAL MONEY MAKEOVER - By DAVE RAMSEY.
I wish I hadn't listened nor been influenced by my husband and just got on with changing our spending habits at once and read these books and followed them when I bought them.
It only needs one of you to change!
And the other one will -resist full or not follow suit!
I promise it will get better!
But you need to do something and not do 'mood boards' and think that something 'bigger' than you will sort it all out, just like that, just by You thinking and hoping it will get sorted. Yes! I did that! NOOO- it won't-
You are an adult and you need to sort it out.
But that's ok!
You can do it.
But you need to calme down and have a good night sleep so you can think and find YOUR solution to Your problem.
First of all, stop spending!
No Costa Coffee!
'Step change' is great!
They are very supportive and they will give you info if you have never been here before.
Write do everybody you owe money.
Make sure you write to ALL!
Say you can only pay £ 5- i.e
I got to pay our bills in installments as they hadn't been paid in months!
All lenders and companies want some money and a little at the time is better than nothing.
DO NOT LET ANYONE BULLY YOU TO PAY MORE THAN YOU REALISTICLY THINK YOU CAN AFFORD.
Then you just say- well- 'Step Change' said I should pay £ 1, but I am willing to go a bit further and I am offering you £ 5/50 - whatever you think you can afford just now! You also say that when!!! Things get better you will let them know and you will pay more.
ALL NEEDS TO BE VERY TRANSPARENT!
Don't try to be clever- you will be caught out!
And do mediation!
My best advice? if I had met myself in March 2015?
You can do this!
You are much stronger and much more clever than you think!
I know you can do this!
Take 1 step at the time.
Stop all silly spending.
Take control of the money
But- have some fun 1. month- just a little one! just a little treat!
And of course- WRITE EVERYTHING DOWNN THAT YOU SPEND.
It's not a question about how much you earn! Not at all!
It's all about how much you SPEND!
So stop spending!
I wish you all the best!
And trust me-
If I, housewife for 15 years, can get my act together with a reluctant husband who still thinks we can spend like made- so can you together get there!
Clear mind and action is the way forward!
Up and beyond!
Love to you all!
Would the mortgage company allow you to extend the term of the mortgage? It could free up cash monthly to pay off more debt. Look at everything coming out your account and get rid of anything that's non essential, i.e. Netflix, Sky, lottery tickets etc etc. My husbands job changed very suddenly last year and I just went through everything I could to save money. Downgraded our car, extended the morgage, looked at all our insurances and energy bills and changed suppliers where I could. It's amazing how much money you could save wheN you do all these things. Hopefully that might free up some more cash that could be pumped into your debt.
If all this doesn't help Maybe it would be best to sell, pay off debt and go into rented in the short term until you are in a better position to buy again. I wouldn't recommend permission to let you end up paying a fortune in fees and it only take a bad tenant who doesn't pay rent for you to be in serious financial difficulty.
Hope it works out for you.
Read FrugalQueen, she was in much the same position as you are:
Living in large house, loads of debt and couldn't downsize because she couldn't get a mortgage. She managed it but it is quite radical.
Stepchange could be helpful as well.
Like a lot of poster are saying, panic will make you kind of cease up with fear and that's not helpful. When I left my job we had to think of lots of ways to save money and we found we could live on a lot less. Now we are even saving. We changed all the bills for cheaper, mortgage etc, we walk most places now, eat cheaper but actually better. It does get better.
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