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The best way out of debt?

(22 Posts)
hungryhippo90 Wed 25-Jan-17 21:00:55

There's a long story of how I got into this mess, just to run over it quickly,
My husband got himself into a lot of trouble, and we started to use my credit for our things, which all stopped being paid when he went bankrupt.

These debts are in my name, that he mostly ran up.

Our marriage is now over, and I am trying to get myself back on track.

I've tried to speak to CAB and step change. They both tell me I must send my car back which is on HP and enter into payment plans, I just can't do that. Mostly because the car is now worth about 6k and I still owe about 9k on it, plus I need it desperately.

Whilst I'm in a lot of debt, only a few grand is showing up on my credit file.

I'd like to start paying this off, but I've no idea how to now, if I'm honest.

Most of these accounts haven't had a payment on them for between 6 and 12 months.
Am I better off to try and make bulk payments, or just try and make what would have been a normal monthly payment on these accounts?

I'd quite like to make my credit better, I'm not planning any big spending sprees, I just have no one to rely on or who will help if I end up in a mess, so think that if I can get my credit sorted out, I atleast have the option of getting a loan/credit card if I really need it.

Some of these are defaults..some of these are fairly small amounts. In the 200-300 region. I just don't know what's best really.

If anyone has any idea I would really appreciAte it.

gunting Wed 25-Jan-17 21:09:21

How long have you had the hp car? If you are over half way into your contract you can send it back and the rest of the debt gets wiped.

FlappyRose Wed 25-Jan-17 21:15:39

It sounds as though you can't afford the HP car. How far into the agreement are you? As PP says, if you've paid more than half, you can terminate the agreement and hand the car back without owing anything (provided there are no arrears, damage to the vehicle etc.)

I would suggest you listen to the experts. I assume CAB and Stepchange went through your income, expenditure and debts? If so, they have a more comprehensive understanding of your situation than anyone on here. They also know what they're talking about.

hungryhippo90 Wed 25-Jan-17 21:16:08

Hunting, I'd have a guess at 18ish months. The problem being I just can't do it. I've got quite severe issues with my mental health and I need a car. I'd not really manage to get my DD to school, or leave the house. That's all that makes it possible for me.

I've managed to (almost!) Keep on top of the car payments,which I shouldn't struggle with in the future.

It's the credit cards, small loan and catalogue that I'm wanting to sort out really. I've buried my head in the sand.

Bunniesncats Wed 25-Jan-17 21:16:37

I'm working my way out of debt and will be debt free in a years time. I didn't use any companies to help but did access help from money saving expert to learn how to deal with creditors link here .... www.moneysavingexpert.com/
I found it best because of my circumstances to go through my income and outgoings, seeing where I could cut back and what was essential and then dividing what was established over between what I owed. Some companies were very harsh wanting more than I could pay but I stood firm. You can only pay what you have. You say you need your car - is there an option to return it and get a small runaround for a one off payment or for less per month?
Once you have got your debts under control and are early clear then you can look at other ways of improving your credit score. In the meantime pay your usual bills on time and get payments to the debts underway. Good luck it's exhausting in the beginning but once it's all set up its a doddle. flowers

Love51 Wed 25-Jan-17 21:16:47

Phone each creditor. Arrange to repay debt at a small / nominal amount per month. Pay off the debt with the highest interest first, then the next highest, etc.
Earn more money (may not be possible if you are loan parent of dcs, as second job opportunities are limited).
Do what stepchange and CAB advise.
If you are massively in debt, consider an IVA. If your debts are high interest, consider a consolidation loan (or using eg low interest overdraft to pay them off. But this will use up your emergency buffer). Good luck!

Bunniesncats Wed 25-Jan-17 21:18:04

Should have been left over not established blush

FlappyRose Wed 25-Jan-17 21:19:27

If you need the car, have you considered speaking to the finance company and asking them if they'll extend the term of the agreement to reduce paymens or exchange it for a cheaper model?

Love51 Wed 25-Jan-17 21:20:11

Like bunnies said, pay your bills! You seem to be doing this, just remember, non payment of council tax and utilities can cause problems, not paying a catalogue will 'only' mess up your credit rating.

hungryhippo90 Wed 25-Jan-17 21:20:32

Flappy rose- I believe it was an IVA they wanted me to enter into, which would mean the car had to go, it's apparently the same with everything that's on HP.

I can afford the car. I have just gotten into a situation where I can pay my debts, so please don't recommend I send my car back. I've also explained that it's absolutely essential, and cheaper than the taxis I would have to take otherwise.

All I was asking was, is it better to try and pay off my debts as per the original payment plan, or in lump sums.

lougle Wed 25-Jan-17 21:21:36

You need a car. Not this car. You can get a perfectly good car for about £500.

Bunniesncats Wed 25-Jan-17 21:28:12

All I was asking was, is it better to try and pay off my debts as per the original payment plan, or in lump sums.

It's usually better to pay your debts as per the origional agreement (which I am assuming is monthly payments). It will make it easier to budget for each month and to keep track of who you are paying and how much you still owe. It might make it longer to pay some debts off but this is better than paying a large sum to one and not paying the rest. However if you do find yourself with extra spare cash one month you could always make an extra payment but not at the expense of another debt.

hungryhippo90 Wed 25-Jan-17 21:28:25

Bunnies&love.

I got into so much trouble with my finances because my husband was the main earner in our house, and he frittered it away before it ever got to household expenses.

We've been split up since November and even with just my wage, I've felt rich (I'm only talking £140 a week!) And I've just had my child and working tax claim accepted.

It's my view that as I've managed to survive without that money, I can carry on surviving without it for a while longer, and get these debts paid off.

I am paying the household bills. Everyone's been quite happy to accept minimal payments so far, but I had to explain just how bad things have been.

FlappyRose Wed 25-Jan-17 21:29:46

If you have the means to pay your debts, it is always a good idea to clear those with the highest interest first while maintaining at least the minimum payments on the others. However if you're in financial difficulty it's important that you treat all your creditors fairly. Not only will those who aren't getting paid as much be unhappy (if they're aware) and more likely to take further action against you but, if you can't sort it out and you need a DRO or bankruptcy later down the line, preferential treatment won't be viewed favourably.

Did CAB or Stepchange talk about alternative options if you don't return the car? How much are the payments compared to the amount you can offer towards your debts?

floopyloopy Wed 25-Jan-17 21:37:11

I'd really recommend Dave Ramsey's method - podcasts on iTunes, lots on google or read total money makeover.

Another vote for ditching the car. We've gone from a brand new BMW on finance 🙄 to a £1k fugly car.

We've also gone from 46k in debt down to 6k. It hurts, but honestly it's worth it.

hungryhippo90 Wed 25-Jan-17 21:39:27

Flappy rose, thank you. I believe it's virtually all had as much interest adding to it as it will ever have. Many of these accounts are in default.
I can offer the same amount on all of my accounts as the original plans that were set up.
They didn't really go any further with it than telling me about anything on HP having to go back... my life's fallen to pieces over the past few years, and it felt like sending the car back would just have made things worse.
To be honest, if I can pay off the debts as per the original agreements, in six months time the only debt I will still have is my car loan, which will have reduced too, because the missed payments will have been made up for.

Thanks for the advice. I'm just trying to get my life back on track.

Bunniesncats Wed 25-Jan-17 22:47:47

Hungry I can empathise the majority of my debts were still overhanging from my marriage and while trying to deal with mh problems I ignored them and it all got so worse mainly because of the interest that was being slapped on each month. As my mh got controlled I started to get a grip on my finances.
If you have spoken to your creditors and have a payment plan in place then I would keep to thar plan. If you feel you can pay each of your debts the agreed amount each month and keep your car then do so it's about what you can manage.
Can I ask have you gone through the income/expenditure process and have agreed payment plans that you are sure you can cope with? If so carry on as you are and if you find yourself with a little extra spare cash at the end for the month the pay a little extra to the debts with the highest interest.

Lorelei76 Wed 25-Jan-17 22:57:09

Sorry you're in a tough spot
It's hard to advise without figures, I realise you don't want to post them them here but I think I'd work out:
Cost of returning car and buying cheaper one - may not be feasible in which case cross off possible list

Then look at debts with highest interest rates and urgency to pay. It sounds like you can pay the debts but are unsure how best to do it? You need to pay it off cheaply so attack the ones with the highest rates of interest.

BG2015 Thu 26-Jan-17 19:36:45

I second going over to the money saving expert forums. Debt free Wannabe board. I'm not in a lot of debt but by reading and posting on the forums I've learnt so much about budgeting, etc.

I've got rid of my overdraft and built up some savings. Go and seek their advice over there, you may be better going on a DMP (debt management plan)

BarbaraofSeville Fri 27-Jan-17 21:15:42

Another recommendation for moneysavingexpert's debt free wannabe board. On the subject of the car. Do you really want to pay another £9k for a car that's only worth £6k?

You should probably get proper advice from somewhere like Stepchange or Christians Against Poverty with working out your proper budget once you know how much you have coming in, but you might be best stopping paying for the car, letting it get repossessed and using a few payments to buy something that you own outright and is cheap to run. Use taxis or public transport for a week or two if you end up without a car.

languagelearner Sat 28-Jan-17 18:56:18

What was your question again, Hungry? There was a lot of talk about your car...

But, anyway, because of interest rates, that accumulate over time, you might be better off paying it all off at once, and to do that as soon as possible. Or to refinance the loan(s) to one/several with a lower interest cost.

I don't suppose you could manage without a car? If you can't you might want to analyze (for yourself, you need not dwell on it on this web board) why you can't do it because there are lots of costs attached to owning a car (not just fuel but also insurance and the value of a new car dropping fast etc. if you compare it to commuting on public transport)

user1485899292 Tue 31-Jan-17 22:00:26

Message deleted by MNHQ. Here's a link to our Talk Guidelines.

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