Debt help desperately needed.

[Ablo]

Sat down tonight to crunch the figures and it's truly heartbreaking and ended up being an argument between myself and OH.

Things have got out of hand and we now have 5k worth of debt over various accounts (credit cards and store accounts). Plus the car which has 4k outstanding too.

We desperately need to get back control and fix our wrongdoings but have no idea where to start.

Could anyone explain what a debt consolidation loan is please? I've had a look tonight and we could be debt free in 2 years if we could merge them all together but is that even possible as the debt is in both of our names and across multiple platforms. Do the loan companies give you the money and you pay them or do they pay them for you?

Hopefully someone with knowledge can help :(

Before you do anything, get in touch with StepChange for debt advice.

Have you missed any payments on your cards? If so, you might not be able to get a consolidation loan if your credit rating is damaged. Can you afford the repayments every month on the debts now? Could you afford the theoretical loan? Google the snowball method of paying off debts, particularly if some are quite small and can be paid off in a few months.

You have to be careful where you look for debt advice as there are so many companies looking to make money out of people struggling. Try the following:
Stepchange is free, as is citizens advice, or if you can deal with things yourself, there's lots of help and information on www.moneyhelper.org.uk/en/money-troubles/dealing-with-debt/help-if-youre-struggling-with-debt
Good luck .

Don't rush into anything. Some schemes charge a hefty admin fee. Contact the CAB for ways to manage your debt.

Get help from a free debt specialist and the debt worker will work with you to find the best solution. Stepchange, national Debtline and citizens advice all offer free debt advice

I'm sorry you're in this position.

Are you both involved in getting into this debt or just one if you? What exactly did you argue about?

that all needs sorting out first, if possible you really need to be a tight unit right now.

then StepChange. I've only heard good things about them.

Theyll help you through the whole thing & speak to people in your behalf. I believe they're very good with helping you to work out why/how you got here & helping you implement things so you don't end up here again, but it's only from what I've read on here/articles etc. I don't have any personal knowledge of them

best of luck.

A debt loan is when you move all your debts with high interests, such as to credit cards, to a loan with a much lower interest. Therefore, instead of having multiple debts, you have one loan (debt).

Well done on addressing the problem.

The moneysavingexpert budget planner is useful to work out where you stand, and has good advice.

https://www.moneysavingexpert.com/banking/budget-planning/ budget planner

Firstly, see where you can make cuts and swapping to cheaper utilities etc before debt consolidation. A multi pronged approach will help more than just shifting your debts.

Look at your current spending and make savings there. Go through your house and sell anything you don't need and use it to overpay a credit card etc.

See if you can switch to a 0% credit card.

Christians Against Poverty are a brilliant debt advice charity, get in touch with them before a debt consolidation company.
capuk.org/i-want-help/our-services/cap-debt-help

www.citizensadvice.org.uk/debt-and-money/

You need to look at each amount owed and the interest rates for those.

Store cards have high interest rates usually, those need to go first, pay off the smallest one first and then add what you were paying for that one in to the next card, so it pays that quicker -

Do you have any savings?

Well done for addressing the problem and knowing you need help. I would contact your creditors either by phone or in writing asking for a repayment plan. You will need to list all your income and outgoings and the companies may come up with a plan which will mean you pay off your debts without incurring huge interest rates. Don’t go down the consolidated route unless advised to, you are better off dealing with the companies direct where you owe money to.

You need to cut up your credit cards and store cards to start with.

Start with the Moneysaving Expert budget planner to see where you are with income and expenses, including those which occur infrequently (eg Christmas, car repairs, washing machine replacement, vets bills). If you have a car, house or pets, you need to expect these costs to occur sooner or later and include provision in your budget for them. Don't forget to include the new higher utility bills, and perhaps add on another 20% in case prices go up again in October.

Also do everything recommended in terms of increasing income, cutting costs (eg change broadband, cancel Sky and just get one or two streaming services etc) to free up more money to pay off your debts. Also be honest about how much you spend on food and drink, especially out of the house, and whether you can cut back at all. If you regularly buy coffee or lunches out, or get takeaways, this can cost a lot over time.

A debt consolidation loan can be a solution, but before you consider one, you need to understand your budget and what you can and cannot afford. Because if you can't afford debt repayments and especially if you rent, there could be other more appropriate solutions. But either way, you must regard consolidation (or a formal solution) as a one off last chance solution. Because otherwise in a couple of years time, you could be in a position where you have the loan and credit card debt to pay.

I second contacting "Christians Against Poverty."

There is help out there. Well done in addressing it.

Hope this is clear

A "quick" way to work out debt consolidation is weighted average method.
You look at all your debt and what it will, in reality, cost to repay it.

100 at 10%
300 at 12%
600 at 4%
1000 at ??

Borrowed+repay cost
Borrowed

(100+10)+(300+36)+(600+24)
100+300+600

1000+70
1000
So you repay @ 7%

This⬆️ calc is simple interest and paid on time. Normally you repay some of the debt with each repayment and are charged interest.

So you will be paying compound interest (APR) on your borrowings so most debt will be at different rates and different time lengths and/or you need to adjust because you can't repay the full amount of each debt each pay period.
You can use an online calculator (eg a mortage calculator) to work out what you think you will pay for each debt
You can also add in other charges if you are paying a company to manage your debt.
Eg £20 flat fee

1000+70+20
1000
So you repay @ 9%

You can calculate if the consolidation loan plus interest and other charges are less than or more than your current debt and total expected interest.
Sometimes paying more over a longer period is the best option as you can keep to a managed budget and don't run the risk of missing a payment on a high interest loan.
Eg a missed payment is new "mini" loan or an extra cost of borrowing and you need to repay the loan and a new loan with interest on both
100 at 10% => 110@10%
300 at 12% => 336@12%
600 at 4% => 624@4%

( 100 110+ 10 11 )+(300+36)+(600+24)
100+300+600

1000+36+74.32
1000
So you repay @ 11.032
%

(100+10)+( 300 336 + 36 40.36)+(600+24)
100+300+600

1000+36+74.32
1000

That's where budgeting advice can be very helpful as it set out your day to day costs, the occasional costs and adds a little for the unexpected

Hit post, not edit 🙃

100 at 10% => 110@10%
300 at 12% => 336@12%
600 at 4% => 624@4%

( 100 110+ 10 11 )+(300+36)+(600+24)
100+300+600

1000+10+71
1000
So you repay @ 8.1%

(100+10)+( 300 336 + 36 40.36)+(600+24)
100+300+600

1000+36+74.32
1000

So you repay @ 11.032%

Sorry you're in this situation - I've been there too and it's miserable.
Contact Stepchange and sort a payment plan that works according to your circumstances. They are very understanding, non judgemental and very helpful. They take a lot of the worry away as send you a letter template to send to your creditors.
When I was in debt, they thankfully sorted me out a payment plan where I paid £1 a month to my creditors for a year on the understanding that I would pay when property was sold. They could not take legal action as I was showing a willingness to pay. Then, when you do have the money, ask for a full and final payment amount - most accepted 50% of the debt. Good luck

Debt Payoff Planner app can be useful to see how repayment of debts without consolidation would take.

Consolidation can reduce the monthly amount you pay but increase the length of time. It can be better to aggressively pay off small debts and refinance large debts to lower interest rate, then put more towards those big debts once the smaller ones are gone.

so much good advice here, step change and christians against poverty, you may find a bit of a wait for Citizen advice but worth contacting

ill just add make sure you pay council tax and rent as priority, these two not being paid have very fast swift consequences.

That said do you pay your council tax over 10 months or 12? if 10 monthly payments, you can ask to pay over 12 months which may help you

making small changes, home brand on shopping, only using the car for unwalkable journeys will save a lot of petrol (short journeys guzzle petrol) packed lunches, meal plan, cooking once and making 5 meals will all save time, save money on the budget.

moneysaving advice talks about snowballing debts, check it out as a way of decreasing debts

look through all your direct debits and standing orders and cancel anything you don't need, another pp suggested haggling things down

lastly a second job in the evenings, you'll pay 20% tax on a second job but it may help to keep things more manageable - if you both worked a couple of shifts extra that would help considerably over a month

I would second the advice to use one of the many budget planners out there so you can get a really good handle on where your money is going to.

Then see if you can get a 0% credit card and transfer balances across. Check for fees. Cut up all the cards unless you really have absolutely nothing to cover an emergency - put that card away and don't touch it for anything but agreed emergencies.

If it looks like you don't have enough money to pay off the debts over time, then contact one of the debt advice charities. They will work out the best options for you and help you with putting them into action.

Be careful about entering a debt management plan as it will harm your credit score and show on your report for many years, 9k of debt is not that much, but it depends on how much you’re earning and your other outgoings. Can you get a loan to consolidate the debt or a 0% credit card? Have you missed any payments?