Debt repayment / consolidation

[Reluctantadult]

Hi all, name changed for this. Dh and I are up to £27k of debt, and I'm hoping for tips on what to do with it all. It's from 2 loans for cars, one £5k with 2yrs to go, one £9k with 5yrs. We've got £7k left on a cm from when we bought our first house, which is on 10% interest for another 20yrs. We owe my mum £5k which we can gradually repay. We be about £700 on credit card. We could do with doing about £5k work to the house, which we don't have. Our major outgoings are £500 on debt, £600 childcare (free hrs next Sept), £500 mortgage. We could put an additional £10k on the mortgage, so I'm thinking of doing this, paying off the original house loan £7k and then having £3k to either get the roof done or pay some of the other debts. Is there anything I haven't considered about putting debts into the mortgage? Is there a better way?

Another suggestion, that's bound to be unpopular because it would be considered 'stealing from your DCs future' by some, would be to use the DCs savings to pay off debt and then replace it, including lost interest, when they start school and childcare costs decrease.

Assuming that the money can be withdrawn and replaced without penalty, of course.

Op please don’t spend £9k on an estate car. You would easily get one for £4K that would last 5 years. Just do some research on cars. You don’t need to spend £9k.

It might be more over the long term but we need to keep costs down for 1-2yrs then we will be able to chuck more money at paying it off early.

Will have a repeat car conversation with dh.

You need professional advice. Stepchange are good.

Consolidating is rarely a good idea and I definitely wouldn't be adding it to the mortgage.

You can't afford a 9k car or to be putting £50 a month away for your kids as you're in huge debt!

Right I've just done step change. There is no problem with our current debts, and having a good amount spare every month. The problem is buying the new car. So the conclusion is that we can't. We have to repair ours, get DS through childcare and to school, and then look to make change our car. I will have a serious chat with DH.

Would I be able to put the £6k personal loan with the 10% interest rate onto our 0% interest credit card????? Is this a bad idea or a good one?! I suppose the other option with the car is to buy one that lets us pay with this credit card. A couple of garages said they would, but not the one we settled on.

By no problem, I mean we can make the payments and still buy food.

I agree about getting professional advice on this. In addition, be careful about adding to the mortgage without making sure you have a good level of equity otherwise it can seriously impact on opportunities to remortgage for more favourable rates

Depends what the credit card allows. Some allow money to be transferred to a bank account, but that might not be 0% or might carry a fee. Some are only 0% for a balance transfer from another card. You need to check the rules/fees for the card you have.

A lot of garages don't accept credit cards due to the fees and by law, they're not allowed to ask you to pay the fee. If you get the existing car repaired at a garage, they're likely to accept credit cards or some chains might do interest free credit, but they're unlikely to be the ones with the best prices as usually more expensive than independents.

I'd still check all your outgoings though. Just because in theory you have enough money to cover all your bills, doesn't mean that you're budgeting sensibly. How much do you spend on food for example?

Utilities and phone/broadband/TV. If you're not on a deal for all these, you're almost certainly spending too much. Do you shop around for all your insurances?

What sort of garage won't take a credit card?! That sounds dodgy right from the start.

You could pay off a debt with a 0% credit card but bear in mind the 0% only lasts a short time and then becomes something like 24% so if you won't pay it all off before the 0% runs out I wouldn't bother

I mean garages that sell cars not ones that repair them. It's quite common for car dealers not to accept credit cards because a car purchase transaction could cost them hundreds of pounds, and take a good chunk of their profit.

If the OP uses the 0% credit card, as long as she moves the balance on again before the rate goes up, it's fine. It sounds like she's got a good credit rating and good income so no reason to think why she wouldn't get another card.

Go to money saving experts forums on debt /debt free wannabe they'll give you great tips on managing this increasing debt.

I'm afraid you aren't as good with money as you think you are if you carry on collecting debt and using credit. I've been there but luckily came to my senses paid it all off (took ages) and learned how to save.

www.autotrader.co.uk/classified/advert/201908191313453?advertising-location=at_cars&year-from=2007&maximum-mileage=80000&price-to=4000&postcode=rh158hu&body-type=Estate&page=1&price-from=2500&make=FORD&year-to=2019&fuel-type=Petrol&onesearchad=New&onesearchad=Nearly%20New&onesearchad=Used

Here’s an example of a reasonable estate car that’s under £4K

That's a good car in my view. The problem is dh would not even consider that because of the age. Most petrol cars die at 10 or 11. So that's a 2yr car. I would consider it. I'll talk to dh.

@justchecking, the vast majority I've asked, which is a lot

I think your husband may have been right 15-20 years ago, but 10 year old cars nowadays are not old bangers. Me and dp had 2 cars - one focus (15 yo) one Astra (20 yo). The Astra got written off a month ago by someone coming round a bend too fast, but we’d had it it for 7 years and never gave us any trouble. It cost me £1500 when I bought it. The focus is still going strong and it’s done 200k miles.
I know that we may have just lucked out there, but modern cars have a much much longer shelf life.

There's no easy way to say this without sounding a bit rude, which I don't want, but it sounds like your DH has strong ideas about what type of car and life he wants without really being able to fund it right now. Your best option is likely to be to fix your car and keep it going, and to buy a newer car when you can afford to do so, either by having cash or by having reduced your debt a decent amount.

The issue we've had is the repayments are really low, £78, because the term is so long.

But the payments being low today isn't great in the long term. It means more of every single one of those payments is going in interest, rather than paying off what you borrowed and getting it closed.

It's really, really easy in your situation to keep balancing things until your child starts school, and you'll have more money, but eventually you've got so much waiting for that time that you don't actually save enough to do everything you'd planned. Like when people hugely over estimate what they can do in a week off! And if your roof will need doing soon too, that could easily wipe out any childcare savings for a bit... and the next thing will crop up after that.

I think, sadly, you need to talk to DH and explain that you can't afford the car he wants right now, show him the figures and find a way that starts lowering the debts now.

But credit for starting the thread and getting advice, getting your head out of the sand is hard

@barbara and everyone else thank you for your advice to me. I am listening.

Food was £80 this week, but we've allowed for £400 a month on the spreadsheet of doom.

Technology and TV adds up to £96 a month so will question some of that with dh, who has snuck sky sports past me for £24 a month.

Utilities & insurances are switched annually.

Most petrol cars die at 10 or 11

Utter bollocks. Where on earth did you/he get that idea from, 1980?

DP has just bought a 56 plate petrol car, so 13 years old. It has a full service history, cost under £2k, but is smaller than what you're looking at and runs brilliantly and looks like new.

I fully expect it might need some work along the way, but we could easily get 2/3 years out of it, quite possibly more.

From that's what my last 2 have done...

I need to talk to DH about this very seriously. He has talked me up significantly on car expectations. Because we earn good wages he tends to think we can just have 'things' and I'm apparently stingy.

Well you can have what you can afford. Most people can't afford everything and compromises have to be made.

It's also not great to be in debt on good incomes. You should be able to afford to have nice things without getting into debt, because if you keep borrowing, eventually all the money that you should be spending on nice things, or saving for the future etc etc, will be going on interest to service the debt - not good.

Do you have decent pension arrangements? It's going to be a hell of a come down from 'good wages' if all you have is the state pension.

You should also consider what would happen if one of you couldn't work due to illness - how would you pay the bills and service your debts without an income?

If your DH wants Sky sports etc, then he should be paying for it out of his own personal spending money, after bills, debts, food, savings, family things etc has been paid for.

At the mo we don't have personal spending money. I have suggested we start this up and have £100 each. I will also talk to him about diverting the money we are saving for the kids into our own savings account until we have a buffer. I have a civil service pension and dh is paying extra on his. I feel like the future is more sorted than the now.

Don't be adding to this debt by having a 9k car. If your current car is fixable fix it.
Concentrate on snow balling the rest of the debt.
The 700 set up a standing order above the minimum get it gone.
The loan on car 1 let it run.
The £100 on children's savings throw it at your 10% mortgage payment.it could be gone in about 5 years.

Set up a regular payment to you mum.

I second the car thing. If you’re buying a £9k car and paying interest then you’re already paying more than it’s worth for something that loses value. Surely better to ‘lose’ money fixing the car you have? Without the burden of a 9k loan? Work out interest vs the repairs to help maybe?

I’m not great at this kind of stuff but that’s probably how I’d start looking at it.