Need some advice on debt please

[RedDeadRoach]

I was thinkng of going to see a financial advisor but I'm pretty clueless when it comes to managing money so thought I'd ask here for ideas on how we can manage our debt more effectively to get it paid off.

We've got about £12k credit card debt (We've got rid of about 10k debt over the past few years) and we owe £2500 to family members who could do with it back but who aren't charging any interest. The credit card debt has just come off the interest free period and is now between 17-22% over 3 cards. I've just applied for a new credit card on 0% but the credit limit is only £1200. Dh applied for one but was declined .. we think it's because he said he needed to transfer so much. We have both got excellent credit ratings and we are no longer adding to the debt and haven't done for a few months but we do usually end up just over the overdraft. I don't think we would be able to get enough on more credit cards to cover the entire debt. Our fixed term mortgage is coming to an end next year, currently around 5%.

Has anyone any ideas on what to do with all this debt? We want to pay it off asap but money is too tight to throw a lot at repayments every month so up till now we have been trying to chip away at it while keeping interest as low as possible. We are paying just over minimum payments using the standing order trick.

We're in exactly the same boat but with more debt. Spoken to our financial advisor and unfortunately in our situation all we can do is chip away at it. Hopefully you'll have more luck than us 🤞
Very stressful when I'm on maternity leave and stat pay!

It's a Money Advisor you need to see, not a Financial Advisor. They are different with different qualifications. A Financial Advisor can help you remortgage or with life assurance policies or pensions advice (for example) whereas a Money Advisor can help look at your debt options.

Christians against poverty, and Stepchange

How much do you go over your overdraft each month? What is the financial penalty for doing this? Is it an option to pay minimum or smaller payments on the c/cs next month to try and get the overdraft under control? If you are facing constant charges and penalties, you are sinking (even if only a little bit) and need to get back on an even keel.

More important questions:-

• How much can you pay to to the debt every month?
• Have you done a snowball calculator to see how to pay back the debt in the most clever way?
• How much can you afford to pay back your family members per month and is this a satisfactory amount for them?

-Do you have any savings for car repairs/dentist/new washing machine etc? It's laudable to want to throw everything you have at the debt but it can be counter productive if you end up using cards again when a big unexpected bill arrives.

Oh and have you looked into consolidation? This isn't often a great option as people may just track up the c/c debt again and end up in a worse position, but if you're dedicated and disciplined, it can work.

When you say "just over the overdraft" do you mean you go into unauthorised overdraft?
If so I think your credit ratings may not be as good as you think they are. Have you done credit checks through Experian or Equifax to make sure?

A financial advisor cannot help with this speak to Christians Against Poverty or Step Change x

It might get to the point where the interest is more than your paying, if your going to struggle with the payments step change I'd say like the other posters

Thank you for the help. I will take a look at those resources mentioned. A couple of months ago we were about £400 into the overdraft, last month we were £150 in so this month we should end the month not going into it. It's an authorised one so hopefully won't have affected the credit rating. The charge is £1 for each day we go into it but we normally end up in it at the end of the month so last month the charge was £5.

We are only just paying over the minimum so can't reduce it any further, it would only save us a few quid anyway. We have no savings. Currently not paying the family members anything. This is why we are in the overdraft , the washing machine and tumble dryer both broke down at the same time and we have 2 young children so had to get them fixed. We have done credit checks with experian and we are both in the green.

I am definitely motivated to sort this out, I'm fed up of living with absolutely no luxuries and always scouring the freebie sites for things we need.

I would definitely speak to Stepchange or Christians Against Poverty OP and I’d do it this morning.

I've just done the step change debt remedy and it says to call them so ill do it when they open.

You might find that if you have enough money coming in to keep making the payments even if it takes you years and years then step change etc won’t help. (They wouldn’t with us in a similar situation).

Can you ring the card that’s given you the lower limit and explain the circumstances and see if they will raise the limit so you can transfer more? We did this with Barclaycard who initially gave us a limit of £1500 which wasn’t enough to transfer the balance, we rang and they agreed to lift it to £6500 which meant we could transfer the entire other credit card over.

Also, some personal loans are cheaper than credit cards. We have a personal loan with Halifax which has one of the lowest rates we could get.

A personal loan is likely to be a much lower interest rate than your credit cards.

When we remortgaged we borrowed more and paid off our credit card- it was only £3,000 and obviously has interest now but it feels better having only one thing to pay off and as the new interest rate was lower as we were no longer on a first time buyer rate (2.3 instead of 5.49) the mortgage payments worked out cheaper anyway and now we are able to overpay

You are not living within your means if you rely on cc and overdraft each month, and the cycle of debt continues. Keep records of all your expenses - break down the essential living payments such as rent, council tax, utilities, travel to work etc - to see how much disposable income you have and the maximum you can regularly put towards the debt, after food and limited spending on luxuries. At the moment you are just servicing the debt by making low payments, Stepchange can help you freeze balances and agree a repayment plan so you reduce the amount owed and avoid further charges. Could either of you work more to maximise your income?

Step change! Best thing I ever did.

Thank you so much for replying. We aren't relying on the credit cards any more, we haven't spent on them for about 6 months so we've broken that little part of the cycle. This month we should be out of the overdraft. We can't really work any more, we've got two young children that we can't afford nursery for so have to work around each other but we are picking up as much overtime as possible. We do have a budget that we go through every couple of months at most, usually every month, to see where the money has gone. I do need to go through the energy suppliers and check the rates again although I think we are locked in for another few months on those.

Come and join the Frugaleers threads. There are several of us who are paying off debt or saving for specific things .... It is full of great advice about spending less but still living.

Sounds like you have started to break the cycle and by having paid off debt in the past you know you CAN do it. So you need to become more focused.

You need to do a Cash Flow Plan before the month begins. Your current budget which you say you do every couple of months is not working as well as it could...you need to look at your spending and make some more cuts. The more overtime you can get the better as it sounds like the problem is mostly lack of income vs the expenses you have... so increase income and decrease expenses will make some money available to pay off debts.

Sounds like you are doing really well with the overdraft, that’s really well done to get rid of that in such a short space of time.

I would try stepchange & Christians against poverty, the citizens advice use stepchange so you can go through them if needed

Often around Christmas there are one of events needing extra staff at weekends

Check benefits - are you on a low wage and eligible for any benefits?

Doubling up cooking trick - freeze for the following week so you have a shopping free week. Make things like chilli, curry, shepherds pie and make soups, use the soups to fill up on so you eat a smaller portion of dinner.

I’m a big fan of Dave Ramsey. American. Has a daily radio station.

He has 7 baby steps. Plan to get out of debt.

He’s not everyone’s cup of tea, but he has podcasts and you tube channel.

Step 2 explains snowball debt, but would probably do that before step 1

Thank you all so much. I felt so hopeless yesterday that this debt was never going to go and now i feel more positive. I called step change this morning and the lady was really lovely, I know our situation could be a lot worse so i didn't know if step change could help but she was really reassuring. I'm going to go through our spending for the last few months tonight and see if I can really figure out where our money is going. I've realised I can squeeze 1 hour extra overtime a week, so every little helps. We are very slightly over the threshold for tax credits etc, I checked on entitledto when i went back to work.

Pop over to the money saving expert website and go to the debt free wannabe part of their forums.

They are excellent at advising posters how to tackle their debt. But be warned they are ruthless!!

Hi @RedDeadRoach,

So your first step needs to be to come up with a realistic financial statement. This is a monthly list of everything you need to pay for which must include all your d/ds and s/os, window cleaner, kids' activities, school dinners, a food budget as well as less regular expenses that you need to save for such as car bills/service/MOT/tyres, haircuts, birthdays, Christmas, dentist etc. Then you see how much there is left as disposable income to throw at the debt.

You can then either work with CAB or Stepchange who can write to your creditors and request interest and charges are halted while you make a regular monthly payment equitable to what you can afford or another debt solution (I'm in Scotland and assume you're not and debt relief laws are different here) OR (& if you have a reasonable amount to throw at this every month over a relatively short period this is what I'd advise as you don't really need debt relief) snowball your debts using a snowball calculator and get them paid off! Or consolidate if you can be really disciplined.

I wonder if its counter productive not putting your children in childcare? Maybe not as I don't know what your earning potential is but you may be better off working about say 10 hours a week each (or more/less) if you use a local childminder and apply for tax free childcare to get tax relief on your childcare expenses. Or do you qualify for any other government childcare initiative?

I'm going to be really tough here (apologies). Obviously you needed a washing machine, I don't dispute that. Did you NEED a new tumble drier? We have a washer/drier which is crap but I couldn't justify the expense or running costs of a tumbler.

I would advocate paying family members something regularly if you can even if it's £20 per month. This keeps them on side and stops resentment.

You can do this. I believe in you. I give money advice as a job but I like spending it too and I have debt to manage and pay off over the next 18-20 months. We can do this! Good luck.