What is the best way to approach 30k debt?

[DebtFreeOneDay]

I'm in serious debt and only just managing to make monthly minimum payments. I need to sort this out.

I've had a really honest look at my finances and the reasons I have got in to this debt, and am taking steps to address the root causes. However, I am confused about how I should approach trying to clear these debts and could massively use some advice if anyone would be so kind?

I have £21,500 across two credit cards and £10,000 on store cards.
Minimum payments rack up to £1100 cpm. These are 'my' debts, although I am married and we share a mortgage.

I work full time and earn 1700pcm. DH is self employed and has fluctuating earnings. We have been turned down for a 25k loan against our mortgage because of DH's self employed status (stupid, really, as we have never missed a mortgage payment and have huge equity in our home).

I am confused about whether I should be looking at debt consolidation loans, approaching those I owe about a payment plan, StepChange etc? Whats the most sensible way forward?

I really want to face up to this and tackle it. Thanks in advance for any pearls of wisdom.

Have you tried a personal loan, you can borrow quite a bit these days, I just did a quick calculation on tescoloans obv others are available and £25k over 5 years is £450. If you have no adverse credit against your name I'd try that first.

Good luck it can feel like you're drowning.

Also citizens advise can do a debt advise service I believe it may be worth a trip.

Have you been on the Money Saving Expert website, there is a “Debt Free Wanabee” forum which is very good. Loads of knowledgeable folk on there who will be able to advise. Step change also have a self assessment tool on their website which takes about 15 minutes to do and then it gives recommendations as to best course of action. Does your OH know about the debts and is on board with it?

Sign up to www.MoneySavingExpert.com and look at the Debt Free Wannabe board. Seriously, people on there are so helpful and helped me get out of a similar debt. I could see no way out and the last thing you need to to take out another debt to pay off existing loans.

There are different methods e.g. - throwing all spare cash at debts with higher interest (probably store cards), coming to agreements with some lenders and looking at where you can free up unnecessary spending to release more cash to repay loans. Really supportive.

You can do it. It's amazing how much richer you are when you don't have debt repayments coming out of your salary. It's well worth it.

A couple of simple principles. Look at the interest rates and penalties, and pay off the most costly first.
I’ve never seen the point of debt consolidation. You still owe the money but it’s too easy to think of it as “only one debt”.
What was the money spent on. Identify any that went on house/ children and ask your dh to cover half of those bits.
Look at your regular expenses and cut back where you can. Cut the gym and run in the park, cut out work lunches and take a sandwich, go on a diet that cuts alcohol.
Make a budget for things like clothes, cosmetics etc that is half what you usually spend, do your own nails and eyebrows. Buy less expensive brands.

Set yourself a realistic target or you’re just going to feel miserable - you have 600 per month, so I’d aim to pay £150 a month off the debt itself.

Can you earn more? Overtime ? Another job in the evenings?

Can you sell stuff? Set up an eBay account and sell everything you don’t need.

You may struggle to get a consolidation loan as your income to debt ratio is high and you have been turned down for a loan recently.

As above Money Saving Expert is a fantastic site. Post your full income and outgoings and you will get invaluable advice.

Can you transfer the Credit Card debt to a 0% card, as it will take forever just making minimum payments.

I had a quick look on my bank and a £30k loan over 5 years is £586 p/m HOWEVER you have to make sure you are doing nothing to increase your debt if you went down this route and Money Saving Expert very rarely advises Debt consolidation.

If you are really struggling then contact one of the free helplines such as StepChange.

Another vote for money saving expert.

Stepchange are good. If you call then they go through the various options DMP or IVA/bankruptcy
If you go ahead they then deal with all the creditors for you so you don’t get endless calls etc and net go through a budget (and tbeybare v v fair and accommodating) and set a monthly payment and the creditors really can’t say no (well they can but tbh they have to accept in the end as of touve made an offer they look bad if reject it)

Are you able to get a loan yourself to pay off the credit card debt as interest will be much lower plus it will take years to pay off that amount in minimum payments each month. I know you've got high amounts of debt but I used to have that amount and was still able to get loans to consolidate every couple of years to get better interest rates as I never missed a payment so credit score was always excellent.

You say you have lots of equity in your house. Would it be possible to downsize ie move to cheaper property therefore releasing some of that equity and using it to pay off debts?

I’d also recommend getting yourself over to the MSE Debt Free board. People on there tend to advise against consolidation loans. What usually happens with those is that people take them out and then start to rack up the credit card debts again. You might think you wouldn’t do that. But the odds suggest you will.

Please try www.stepchange.org/
You can talk to them on the phone or via their site (phone better) but be prepared it will take a good hour on the phone.
They will help you go through all your options - you will need to have ready a monthly income and expenditure, but they will hand hold, talk you through everything, and figure out the best course of action going forward. This seems like a lot of money, but you can get the payments reduced, and a course of action in place. And if you've not done so already, cut up those credit cards and do not take out any new ones. Well done you for tackling this - it can be so scary, but StepChange really are great.

Get a really decent mortgage broker who knows about self-employed mortgages. DM me for a person who has got us two self-employed mortgages.

If you have a lot of equity in your house this should be possible. There are a lot of mortgages out there. A good broker has a direct line to the person making the decisions about a mortgage, and in our case managed to get them to agree it in principle before actually 'applying'. You don't want to apply unless you pretty much know you'll get it as its doesn't look good to have been 'refused'.

Depends on what your credit score is though - have you missed many payments?

Stepchange or Citizens Advice will be able to help, they deal with debts on a daily basis.

Turning unsecured debts into debts secured against your home does not sound like a very good idea.

Cut up all your credit cards and store cards in the first instance. Then, could you transfer the debts 0% credit cards - and destroy those cards as well. Pay the absolute maximum amount you can each month, at least £1k and don't buy anything that isn't absolutely essential.

MSE as suggested, and if you get a loan cut up your cards and delete them off any websites you shop on. Unsubscribe from any marketing emails.

Thanks all for your insights and advice. It feels less lonely having people to discuss this with.

So, yesterday I applied for the only consolidation loan MoneyExpert said I'd have a chance of being approved for and I've been turned down (Tesco). Which is probably going to affect my credit rating now (ouch).

I'm also coming up as having 0-20% chance of approval for all the 0% balance transfer credit card deals on the eligibility checker on Money Expert, so that seems like a non-starter.

On the positive side, I've made a proper list of what I owe, to whom, and interest rates. Some of the store cards are charging 39% APR! I had no idea and feel very stupid. My overdraft (which I failed to take in to account yesterday) is also costing me £67 a month .

I've already sold all the clothes and other items I could think of on ebay over the past month or so and made £700, which I sank in to my overdraft, which is something I guess. I've been brainstorming other ideas for ebay selling, too, to try to bring in some more income. I can't really take on extra work outside of the home (I already work full-time Mon-Fri) due to childcare. But I am looking at applying for better jobs - have got an application going for one at the moment.

I'm going to do a spreadsheet of all my income and outgoings later today and then contact Stepchange tomorrow, I think. Feeling strangely brighter now I've actually faced up to the absolute shitshow that is my financial situation.

I'm having to face up to how I've got in to this debt, which is uncomfortable but also feels good. The answer isnt actually straightforward. I think ultimately I have always subsidised my lifestyle with credit cards, since my student days, really. This was manageable when I had one credit card with a £1k limit. It started to spiral as I was given more and more credit, perhaps predictably. I then subsidised my lifestyle again when on maternity leave and only getting statutory pay. It was still all fairly manageable. The turning point came when I had a period of extremely poor mental health 4 years ago. At one point I wa diagnosed with bipolar disorder, but this diagnosis was later 'overruled' by a consultant psych and I was told it was 'just' depression. I racked up huge debts in that period, including the store card debts.

I've been well for 3 years now, but have barely managed to ale any difference to my debt, so I am obviously still using my credit lines to subsidise my lifestyle. Clothes and eating out etc. That is going to have to stop.

Credit cards are getting the scissors today. I'm also going to unsubscribe from all the promo emails from clothes companies etc.

Anything else I should be doing. Going to have a look at the Debt Free Wannabe forum now. Thanks again, all

And yes, my DH is aware of my debts.

Oh, and I have never missed payments on my credit cards (set up direct debits for minimum payment years ago), but I often make late payments on my store cards .

Never do consolodation loans. Nor should you make an unsecured debt secured.

If you go on a DMP your credit rating will suffer, but it sounds like it has already! You wont get any credit for the next 6 years.

You can self manage a DMP. You have much more control this way. You just phone each provider and ask about a payment plan. The should stop interest, but will need to see you are struggling financially in order to do this.

You've had what the DFW board calls "Your lightbulb moment". Now you're aware of it, you will take more care with spending. Don't beat yourself up too much - lots of people fall into the credit trap. That's how the financial services industry makes its money.

made £700, which I sank in to my overdraft

Be careful with this. Your overdraft is probably your "cheapest" debt and you want to pay off your more expensive debts first.

List your debts in interest rate order and pay off the highest interest ones first.

Pay off as much as you possibly can every month.

You have a £1000 a year tax free trading allowance if you have any skills you could use for self employment.

Do you have a spare room you could rent out?

Well done OP. My husband (then boyfriend) was in it up to the tune of 40k, and another family member up to 22k so i know how tough it can be. But StepChange fixed family member and partner had to declare bankruptcy.
StepChange really will help you figure out what and how to do reduce the debts - let us know how you get on.