AIBU to think that we can't sort this ourselves without professional help - desperate situation

[phillers]

Morning,

In a terrible situation. Years and years of poor communication and financial mismanagement have led us here. I am broken, ashamed and not sure if this is something that we can ever get out of. Terrified of losing our home

please be kind

Household Information[/b]
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned.................... 2[b]

Monthly Income Details[/b]
Monthly income after tax................ 4355
Partners monthly income after tax....... 2511
Benefits................................ 0
Other income............................ 250[b]
Total monthly income.................... 7116[/b][b]

Monthly Expense Details[/b]
Mortgage................................ 801
Secured/HP loan repayments.............. 386
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 139
Electricity............................. 98
Gas..................................... 112
Oil..................................... 0
Water rates............................. 35
Telephone (land line)................... 0
Mobile phone............................ 67
TV Licence.............................. 13
Satellite/Cable TV...................... 36
Internet Services....................... 21
Groceries etc. ......................... 600
Clothing................................ 30
Petrol/diesel........................... 220
Road tax................................ 22
Car Insurance........................... 64
Car maintenance (including MOT)......... 30
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 120
Medical (prescriptions, dentist etc).... 9
Pet insurance/vet bills................. 28
Buildings insurance..................... 22
Contents insurance...................... 17
Life assurance ......................... 49
Other insurance......................... 9
Presents (birthday, christmas etc)...... 100
Haircuts................................ 20
Entertainment........................... 150
Holiday................................. 0
Emergency fund.......................... 100[b]
Total monthly expenses.................. 3298[/b]
[b]

Assets[/b]
Cash.................................... 0
House value (Gross)..................... 320000
Shares and bonds........................ 0
Car(s).................................. 14000
Other assets............................ 0[b]
Total Assets............................ 334000[/b]
[b]

Secured & HP Debts[/b]
Description....................Debt......Monthly...APR
Mortgage...................... 140098...(801)......4.11
Hire Purchase (HP) debt ...... 17000....(386)......0[b]
Total secured & HP debts...... 157098....-.........- [/b]

[b]Unsecured Debts[/b]
Description....................Debt......Monthly...APR
updraft loan...................21000.....360.......16.9
updraft loan 2.................8000......210.......18.9
Updraft loan 3.................6500......165.......18.9
overdraft......................2500......80........42
Creation Credit card...........7100......192.......21
very...........................700.......48........50
halifax cc.....................2400......24........0
fluid..........................3600......170.......39
LLoyds.........................3890......132.......8
HSBC loan......................7309......210.......7.9
Lloyds.........................10500.....269.......29
barclaycard platinum...........12600.....258.......4.9
barclaycard....................4960......109.......4.9
natwest........................2000......20........0[b]
Total unsecured debts..........93059.....2247......- [/b]

[b]
Monthly Budget Summary[/b]
Total monthly income.................... 7,116
Expenses (including HP & secured debts). 3,298
Available for debt repayments........... 3,818
Monthly UNsecured debt repayments....... 2,247[b]
Amount left after debt repayments....... 1,571[/b]

Cards are all cut up. No possibility of us moving to 0% right now as we have too much debt and are seen as high risk

Partner thinks that it's fixable if we budget properly and start on the highest interest debt. I wonder if we need professional help

AIBU to think that this is not fixable by simple budgeting

Honestly I think your DH is right. It’s going to be just plain old hard work and sacrifice at this point.

Here’s how I would tackle it…(using round numbers for ease.

Month 1;
Take your 1500 and pay off
very...........................700.......48........50 700
+
halifax cc.....................2400......24........ 0 800

Month 2;
1600

halifax cc.....................1600......24........0 1600

Month 3-8
1600
Creation Credit card...........7100......192.......21 1600

Month 9-10
1800
LLoyds.........................3890......132.......8 1800

Then start in on the big guys… knock out the overdraft at some point and if you need a boost shift from one of the big loans and focus on a credit card for a couple of months until it’s gone.

Check out this forum for help with the journey https://ymam.proboards.com/board/58/women-red. A lot of these women have paid off similar amounts of debt and are super supportive. They’ll offer advice and accountability

I'd seek help in your shoes.

But be prepared, you are facing a huge lifestyle adjustment.

You have been living a life far beyond your means. And now you have to pay it back, and that doesn't just mean living within your means, it means living considerably below them, for quite a while.

Its going to hurt.

Agree. First put £2000 or so into an emergency fund then pay off the smallest debt first, regardless of interest. It’s not logical but how we get into debt isn’t either.

I think your spending looks ok tbh, you’re certainly not spending an obscene amount on mortgage/groceries etc. I would try to do the snowball thing which if I’m correct, trying to pay off the smallest debts first then make your way up to the biggest debt (not including the mortgage).

But because you have so much credit card debts, I question whether you actually stick to that budget you’ve outlined and maybe try and confront any unnecessary spending that you need to cut out. No holidays, or big lavish expenses. You’ve got to commit to at least 2-3 years of no new furniture, lavish holidays and no new cars.

If it were me, I’d pay off the very account straight away. Then get rid of the two credit cards that are £2k each by end of the year.

Good luck though OP but you both definitely have the means to ride this out and a lot of these smaller cards done and dusted.

Absolutely agree with this.
Extend mortgage to at least pay off high interest debt such as credit cards. The interest rate on those credit cards will mean it's hard to pay off. Eliminate as much of that debt as you can.
Work out a long term plan to get rid of all debt including mortgage.
Budget, stick to it. I don't think you need to get rid of entertainment or pets but shop around for lowest prices if you have the time for everything else.

You can get yourselves out of this. Some very good suggestions on here, Step change is very good. But you need to address how you have got here in the first place & stop. You do have a very good income & should be able to clear this in 5 or so years. But I think you both need to sit down with an unrelated third party, to discuss & put plan in place. Always pay your mortgage above everything else & yes remortgage may be an idea. But you need some good advice & a gentle hand onto the right path. Good Luck 💐

If you ask one of the debt repayment agencies for help eg CAP (Christians against poverty - don't have to be a Christian) and are honest, they look at the debts and income, write to all the people you owe money to and arrange to pay them. You pay the agency and they distribute it to your lenders. You get a monthly statement to see what is coming down. It usually takes a few years to become debt free.

Some good advice on here but it's rarely a good idea to turn an unsecured debt into a secured one.

See where you can make any further savings in your living expenses then snowball the debts down!

It's doable. It's just going to take time.

One thing you should do is contact the credit cards and ask for them to freeze the interest for a period of time due to your financial difficulties. This will allow you to pay the same amount per month but without the interest piling up you will be able to clear the cards.

I did this when I became very ill (I'm life limited) and my income dropped. They were very helpful and understanding and bent over backward to help me.

I am now debt free. So I know it can be done!

Also I agree with previous
posyers, it’s the Dave Ramsey method. I think it’s a good method to use if you don’t want professional help. Smallest debt first and work your way up.

What happens if one of you becomes ill is unable to work? People just look atm and not the future

If I understand correctly, your income is 7,116 and you need 2,247 to pay off debt, leaving you with 4,869 and monthly outgoings calculated at below 4,000

So you should definitely be able to pay off the debt.

Have you definitely got the outgoings right? My mortgage is similar to yours, but building and contents insurance is about £70/month and I allow a lot more than you for car maintenance, plus also something towards the holiday fund, Christmas, birthdays.

Just doing a direct comparison with my own finances, after your debt repayments, it looks like you have £1,650 per month more than I do to live on. I am a single-income household (+ lodger income) with 2 DC. My salary is less than the second salary in your household! But I still manage on my income, though need to budget carefully.

So are you spending £1,650 you haven't accounted for? I think you really need to check that. have you gone through all bank accounts and card statements to see exactly what you're spending and added it all up? Otherwise that's money that can also repay the debt.

£600 on groceries and your mobile phone costs both seem unnecessarily high to me.

Yes, you clearly need to monitor your spending and manage your budget, but not impossible based on what you're saying.

I’m another one who would suggest just taking another mortgage product to pay off the unsecured debt.

You have a low LTV currently.

Your salary (nevermind your partner’s income and your additional income) is a wee bit shy of £75k. Your total mortgage would be just over 3X salary. It’s a pretty conservative number isn’t it? I know people borrowing 5x.

Over 15 years at 6.5% you’d be repaying £810 instead of £2247.

And plenty of products allow you to overpay by up to 10% each year.

I don’t know why you wouldn’t?

Look at the snowball method for paying the debts off. Your husband is right to target the highest interest debts first but you could also target the lowest value first and once that’s paid off you throw all the money and the next lowest one etc etc.
So throw your entire £1500 surplus at one debt until it’s paid off then move on to the next. You can fix this with hard work and sacrifice.

When are you due to remortgage? That could help with some of it. But even then making a target and achieving it would be best. In a month your very account will be clear, by Christmas your overdraft and so on until you just have the bigger (lower interest) one’s left. Then you may be able to do something to consolidate.

Depending on what interest rates you’re paying on all the unsecured debt, I would remortgage as much as you can (speak to your existing lender or a broker) and then pay off as many unsecured debts as possible (obviously the ones with the highest interest rates). Then either pay off the other debts or overpay on the mortgage. I think you could do that without professional help.

What you may need help for though is sticking to this plan, devoting yourself to paying as much off as possible and making sure you don’t start taking on more debt.

You have plenty of scope - once you stop the habit of over spending.

Contact some debt charities - they are often able to stop the interest on the unsecured debts (or used to be at least). This will then stop the debt growing at its current rate. This will then also dictate which debts you then start chipping away at first.

Mortgage rates are high - I wouldn't go that way. Really look at your outgoings and cut everything you can. People have given some good thoughts on where you can do this, and it will be a lifestyle change.

I would consider a 2nd job for a while as well? Without knowing what hours you / your partner work now. I know you will get taxed - but will be an extra few hundred a month to get rid of this debt.

And assuming you have things to show for the £90k debt, sell them. And put it all against the debt. Clothes, toys, gadgets - get rid.

While no-one wants to be in your situation, its fixable. You are very unlikely to lose your home - as long as you face this head on and don't start booking holidays, buying new cars, or buying more clothes!

P.s. if you’re on £75k, £600 on groceries is completely reasonable. I used to scrape by feeding 5 on £400/month by constantly moving between shops to get the best deals, batch cooking, padding out dishes with pulses.

Now I earn £50k+, so FTS. Waitrose delivered my shopping this morning. You’re managing debt, not struggling to eat FFS.

Do not turn your unsecured debt into secured debt!

I'm astonished that you were able to get into this much debt. There should be tighter regulations on lending.

I'm not sure what you need professional advice for though. You simply need to take your leftover £1571 per month and throw it at the debt until it's been repaid.

It's not going to be fun. It will mean no holidays or treats for the next few years, but this is the price for living so far beyond your means. Eventually, it catches up with you.

A financial advisor will probably suggest you remortgage to address the high interest debt.

P.p.s I also think you shouldnt use a debt charity.

(a) your lenders costs in dealing with applications to reduce your interest to 0% is passed on to the rest of us

(b) I expect there are people in more need who need the time of these charities.

(c) you are able to afford to instruct an advisor/IFA/broker to support you in this (if you want to). Consider their fees as an investment, which will no doubt have an immediate payback period and a terrific return.

P.p.p.s. To clarify my suggestion. You can take an additional mortgage product, so you have one at 4.11% and another at 6%+, rather than needing to rip up the 4.11% product. Speak to an IFA.

But they don’t have financial difficulties if they’re making minimum payments and genuinely have £1.5k extra to throw at the debt?

You’ll just have to take paying the interest as the consequence for getting into this situation in the first place.

Would speaking to StepChange help?