I keep hitting brick walls trying to get out of debt...

[Optimisticbanana]

I need to get this off my chest and try and breathe cos I'm getting completely overwhelmed.

Basically over the years we've had bad luck, made bad choices and now have debts in various places that we need to pay off.

One of which is our overdraft. We changed banks, after taking advice due to huge bank charges making us go over our overdraft each month. Things are improving in lots of ways but we still have the old account open and I've been trying to pay £1-200 each month if I can.

We recently got a letter from the bank to say they wanted us to the full amount over overdraft back 4.8k by next month.

We can't do it.

We've tried to get 0% balance transfer cards but all have been declined due to DHs credit rating.

I can make an arranged payment scheme with the bank but this leaves a 6 year bad credit marker on our credit rating and we are desperately trying to get back onto the property market and get our own house again. We are trying to repair our credit rating as well as getting out of debt.

It's all such a mess!

Is there anyone who has any suggestions. I'm so worried about things I'm getting snappy with the kids and just want to run and hide.

Has anyone else been in a similar situation who has resolved things with the bank without it affecting their credit rating?

Not meaning to tag on it's Just I'm in a very similar situation and posted yesterday asking about an Iva, I think only 2 people replied.
Does anybody know what the differences are between an iva and a dro?

The first thing you should be doing with the money you are saving and your OH pay increase is clearing debt.

It will help improve your credit rating and make getting a mortgage easier, overall.

Is there a CAP group near you? (It stands for Christians against poverty but they are really nice & there's no religious over or undertones to their work). It's a free service and won't affect your credit rating.

I think you're just going to have to suck up the bad credit rating TBH. The situation is you have debts that you cannot pay, which will result in a bad rating. It's not the end of the world, although it is frustrating.

I'd contact the CAB or Stepchange for advice. Setting up a debt management plan might be a good idea.

cactusplant if you go on citizens advice website they have info on IVA's and DRO's.

If you have got enough money for a deposit, then you need to use this now to pay off your debts. You will then be able to save up all the money you've been using to pay off the debts, and that will soon mount up. You will also be less anxious about the debts!
In the meantime, your DH needs to increase his credit rating. Every time yo apply for a credit card or loan, this impacts on your credit rating JFK you are rejected. You will not get an interest free one in your financial position. However, you may get a high interest one. What you then do is use it intermittently but set it up so that the full balance is paid off monthly. You have to be very careful that you don't use it for things you don't need. So maybe the weekly shop. That way, credit agencies can see that you can pay back debt immediately, and eventually your credit rating will improve, certainly by the time you're able to afford a mortgage.
The advisor who told you you could get knew now is talking bollocks!

Optimistic it’s really goid that you’ve switched. Have you had a look to see if your water board will help?

Are you able to increase your earnings?

cactus info on an IVA is here? Please read every single bit of it before going for one, especially if you own your own home.

Info on Debt Relief Orders is here.

How you get out of debt will very much depend on things like how much you owe and what your assets are which is why you probably need specialist debt advise, ie not from a company who will benefit from you having an IVA. Try you local CAB, Step Change or Christians Against Poverty.

I’d heartily recommend CAP as well.

Yes it stands for Christians Against Poverty, But they didn’t preach or judge or any of that type of thing.

They helped me out of a truly impossible situation, where I was so trapped and I’d tried so hard but was in a waking nightmare.

They are able to negotiate with banks in a way that we as individuals can’t, and in a way that most other agencies aren’t willing to. They negotiate new contracts for repayment that don’t automatically crush your credit rating.

They believe strongly in working out a budget that is sustainable for you to live on, as earning to pour it all into debt leaving you in great deprivation, will not ever work out. Because people can’t live like that, and so they default and the debt mounts up worse.

I ended up with a better standard of life on their budget than I’d lived on for years before trying to pay it off and failing myself. I was shocked that their food budget per week was twice mine previously! So I ended up paying off the (huge) debt, and stopped semi-starving myself :)

I can’t recommend them enough, although it was a bit slow and you had to go along with their process... it was a HUGE weight off my shoulders when I realised they were genuinely going to sort it all out for me and I could just, well, believe in them and relax and get a decent nights sleep!

Good luck, it will be ok.

@WellThisIsShit that sounds really positive, did you repay purely through agreements or did they suggest Iva/dro?

@cactus I think she paid it off through negoiating new terms with the creditors and then keeping up with those payments. Doing it through an Iva or DRO means it will be on your credit report for 6 years meaning that the only people who will lend to you during that time are Credit Unions or loan sharks.

I really would recommend looking at Christians Against Poverty sooner rather than later.

Please do not get a loan - getting into more debt to pay off debt will not help you get a mortgage.

You need to be reducing your debt levels, not taking out more. Every time you apply for credit it has a negative impact on your file.

You need to get copies of your credit report - do you have any defaults or late payments?

The only sensible thing to do here is pay off your debts with your deposit and let your credit report repair itself while you build the money back up.

I have been trying to get a mortgage for two years due to adverse credit. I have spoken to no less than 15 lenders, including specialist lenders and brokers, and I’ve had to pay back my overdraft, not have a single returned direct debit, not apply for any credit and pay off existing debts. I was left with one default that was over two years old and paid, and thankfully have now been accepted. Don’t bury your head in the sand about this, get your credit reports, pay off your debts and don’t apply for any more credit for a while.

If you cannot get a credit card, you will not get a mortgage. Lenders do not just give mortgages because they know that they can just take the house back if you don’t pay - it is a long and expensive process to repossess a house. They want to avoid that at all costs.

Bifs I’m not sure if the OP has the money or if it’s just being given on the understanding that it’s for a deposit. The OP hasn’t clarified though and I’m not sure the person gifting the money knows about the debts.

Agreed, you really need expert advice. But I'd say look into a personal loan to repay the overdraft. That will enable you to meet your old bank's demand for the overdraft repayment so you don't have any missed payments on your credit record, but you need to make sure you can make the loan repayments without getting into more debt. The loan will be on your credit layout but it's not going to be as bad as a failure to repay the overdraft. Unlike a credit card bank transfer, a loan will have definite payments and an end date.

To add, of course a lot's going to depend on your wider financial situation. It's one thing if that overdraft is the only problem and everything else is getting repaid without much issue. It's quite another if you have a mountain of debt you can't afford to pay back.

Some other possibilities. If either or both of you have enough available credit on existing credit cards you could do a money transfer to pay off the OD, or your new bank might offer you an overdraft that would clear the old one. They could be expensive ways to borrow, especially an overdraft, but I think you're in a situation where you'll have to use what credit you can get if you want to avoid IVA/bankruptcy.

Whatever you do, make sure you can make any repayments, or you'll end up in the same situation with another debt in future.

I really don’t understand why you aren’t using your deposit money to pay off the debt?

This will improve your credit rating. Whereas some of your other options could worsen it dramatically.

You can then plan to save £X per month (perhaps the £600 extra your DH now earns) and you would have a healthy deposit quite quickly

Oh yeah, that. I missed the post before. It's almost always the best option to pay off debts with savings.

@cactus, Jilted is right, I managed to avoid IVA’s etc, and paid it all off without any official debt restructuring agreements which tend to be ‘one size fits all’ and hammer your credit score.

Sadly my stbxh managed to use my name to screw up my score anyway, but not as badly as it would have been... and that’s another story.

The main thing that helped was that CAP managed to stop all the interest mounting up, as I was paying off hundreds each month yet not making any mark on the actual debt due to the banks insane interest rates on the credit card. They totalled up all the debts but without any more interest, and then worked out a reasonable plan of how I could pay it off. They then went to the banks and got them to agree the new terms. There is no way I’d have had the clout to do that as an individual, even getting to speak to a person who had the authority to make those kind of decisions would have been impossible.

Until CAP I was being faced with ‘computer says no’ impassivity as I went down in flames... it was awful.

Never I don’t think the OP has the deposit. She’s said it’s an “early inheritance” which I would assume was a gift but she’s not saying if this is strictly to be used for a deposit or can be used to clear debts.

Safari It's almost always the best option to pay off debts with savings. isn’t it just

WellThis that’s fantastic. I feel really pleased for you. Hope you don’t mind some random MNer feeling pleased about your achievement

You need to get expert advice. CAP are amazing, you can meet with them to go through your budget and see where you can start to pay the debt back. As others have suggested you are most likely paying a lot in interest and paying off only the interest. You will need to knuckle down and limit spending but the positive thing is that it doesn’t actually sound like you have that much debt. If you get things in place it could probably be paid off in the next year or two!

I get the desperate rush to get a mortgage but honestly it sounds like the broker was trying to win your business. You are struggling to afford the monthly payments for debts of around £5000 so like £100000 debt is not going to be any easier to pay off. I’m assuming you pay rent? That will help with your mortgage application but getting the deposit given to you as a lump sum and not saving up for it isn’t a plus for you either. Honestly the main stream lenders probably won’t be interest just now so it would be a more risky mortgage lend and therefore MUCH higher interest.

Good luck with everything, don’t let it keep going or the decision will be taken from you.

OP, if you have debts of that size then it's really not going to help if you get a mortgage (assuming you can, it will be at a much higher interest rate because of the risk). Also, it's not a great idea to be constantly looking for another loan to pay off the last one!

CAP helped a friend of mine, I would give them a go.

*We have money available to us for a small mortgage deposit (as part of an early inheritance).

We previously thought we would not get a mortgage any time soon, but thought we'd speak to a broker just to see and they were a lot more positive than we'd thought they would be.

We obviously wanted to use that money for our deposit.*

I'd speak candidly to the relatives offering the early inheritance to pay the deposit and explain you're in a cycle of can't pay the overdraft off due to excessive bank charges, and ask that they can release you enough to pay the overdraft off (and any credit cards/other loans) now, as that will then allow you to save after that. Maybe ask if they can do it as a loan which you pay them back, such that when it is paid back they can release it back to you for deposit, as that'll get you in a good cycle of saving?

Hi all, thanks for all the advice and kind words. Some very sound advice.

I spoke to a lovely lady at the bank today and after talking through all the options she’s agreed to let me have 6 months to continue to pay off the overdraft without any ‘arrangement’ on the account to prove that we can do it. They’ll assess again in 6 months.
This at least gives us breathing space and luckily with DH’s new job is affordable. There will be no blips. I intend to make this work.

I just feel like a huge weight has been lifted. The lady on the phone was so kind. She said talking to me had reminded her of a few things she needed to do. It was her first day back after maternity leave. I had a little weep after I got off the phone.

Big thanks for the kind words xxx

Contact CAB They're so helpful and not judgemental
Take all letters to them and they will contact the debtors on your behalf
You then fill a financial statement detailing your total expenditure
They will agree a payment plan
Could be as little as £1 pcm
Do it now as the interest can be frozen
This will affect your credit rating so you will not obtain a mortgage whilst in debt

Oh that's great news, Optimistic! Yay for the lovely lady at the bank

Right, set yourself up a standing order of, say £250pcm to the OD. Then write your budget. Write down EVERYTHING, no excuses = no unpleasant surprises when it crops up!

Do have a wander over to MSE debtfreewannabe board, they are brilliant with inspiration and the budget planner is good.

I also really really rate YNAB (You Need A Budget). Bit of a learning curve to get started but it really does bring a lot of clarity to what is affordable, and what your priorities actually are - do you want the house deposit more than the things you usually spend money on. It's quite addictive after a while ... we have slipped off the wagon a bit due to a few things but I'm going to get back on it.

notsquirrels already done the standing order. But definitely looking at budget next. Just saw a budgeting card at the post office so going to look into that too.

Xx

Are they freezing the Internet Optimistic?