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Money matters

Find financial and money-saving discussions including debt and pension chat on our Money forum. If you're looking for ways to make your money to go further, sign up to our Moneysaver emails here.

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Original poster

Debt repayment / consolidation

97 replies

Reluctantadult · 26/09/2019 09:59

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?

OP posts:

flirtygirl · 27/09/2019 14:47

You say you budget well but you have not made good choices for years.

If your income is good then you should not have that level of debt.

You need to do a soa and go to money saving expert.com and debt free wannabe.

Post a true statement of affairs and you will get lots of advice.
Good luck.

Joe2019 · 27/09/2019 14:54

You do NOT have a good handle on your budget.

autumnleaves99 · 27/09/2019 15:00

I really fail to see how you think you've got a good handle on your outgoings. Having a good handle on it would mean living within your means. If you can't afford to buy a car outright, then you get a cheap one and with the smallest loan possible. I spent around £2.5k on my car and it's perfectly fine, there's no way I'd be buying an expensive car if I couldn't afford it.

I wouldn't add the debt to your mortgage, it's just making the situation even worse. Look at the possibility of getting out of your car loans early and getting much cheaper cars instead, that will be a good start!

CloudsCanLookLikeSheep · 27/09/2019 15:02

I took out a consolidation loan a couple of years ago and regret it. It was to pay off credit cards but I just ran the debt up again only now I have less money each month to pay off the actual credit cards as some is going on the consolidation loan. I call them double-debt loans. Be careful!

Bluebell9 · 27/09/2019 15:04

Do you really need a big estate car?
We have a big dog and DP has 2 DC. We both had Golfs until the impeding arrival of DC3.

Original poster

Reluctantadult · 27/09/2019 15:11

The problem has been caused by big life things we've paid for on credit, rather than lavish lifestyle. I'm on board regards a car, but still arguing with dh about that one. If we consolidate it would half our repayments and we'd put the difference into savings to be sure this doesn't happen again. Next Sept we will be £600 better off as we won't be paying for childcare, plus I can up my hours at work.

OP posts:

Original poster

Reluctantadult · 27/09/2019 15:12

My preferred option is to put a cheaper car on existing credit and not take out a new loan. Dh would prefer a better car with a consolidation loan to reduce costs.

OP posts:

autumnleaves99 · 27/09/2019 15:18

There's really no point in putting the difference into savings at this point. You need to work on getting rid of all debts and at that point you can start to build up your savings. Work our how much you're paying on interest each month and that will motivate you to sort it out!

Aside from a mortgage, aim to buy everything outright in the future with no reliance on credit, that will make sure you never get into this situation again.

Original poster

Reluctantadult · 27/09/2019 15:28

We won't ever be able to buy anything outright if we don't have a float of savings. E.g. Our credit card debt is things like car seats and dental costs, there was no money in the bank because I had made overpayments on debts.

OP posts:

PerfectPeony2 · 27/09/2019 15:28

I see many people with large debts in my line of work and what I see happen a lot is that when they get to the point that they have several loans and credit cards they start getting turned down. As affordability fails as they are too much of a risk from a credit point of you- then they are trapped making minimum payments on credit cards and high interest rate loans.

You need to avoid taking out more debt unless you can do one consolidation with very limited further borrowing. Don’t do anything to your house that doesn’t absolutely need doing and buy a cheaper car until you are in a better place financially.

Stop paying into your kids savings for a short time if you need to but don’t raid their savings to pay off debts (like a PP has suggested).

I agree you need some help here and it’s good you have contacted step change.

Original poster

Reluctantadult · 27/09/2019 15:32

Step change pretty much just said its fine 😖 But that was without the £9k for the new car. Which we're not committed to yet.

OP posts:

autumnleaves99 · 27/09/2019 15:34

If you're not committed to the 9k then surely the obvious answer is to avoid that like the plague right now? Why on earth would you get into so much more debt and make your current situation worse? That's utter madness!!

PerfectPeony2 · 27/09/2019 15:42

Then my advice would be don’t get the 9k loan. I know it must be tempting but you will feel so much better for it. Tear up that loan agreement!

Original poster

Reluctantadult · 27/09/2019 15:46

I agree with posters, dh doesn't agree, he now thinks we should consolidate and extend our debt to get the new car, which would halve our repayments. We earn good money and he can't reconcile himself with us buying "a banger" in his words. Especially because in a year our ability to pay for things will significantly improve.

OP posts:

PerfectPeony2 · 27/09/2019 16:01

You mention putting consolidated money into savings which you shouldn’t do. You’ll only be worse off in the long run paying more money in interest over a longer term. Loan money shouldn’t be used for day to day expenses.

Everyone has a different attitude to debt but I would be very cautious in your situation. Maybe you could look for some cheaper cars and get him on board? Even if it’s 4-5k instead of 9k.

beelzeboob · 27/09/2019 16:14

OP you and your husband are not living within your means. Anything could happen in a year!!!

beelzeboob · 27/09/2019 16:15

^ although you seem like the sensible one, he sounds reckless

NoSquirrels · 27/09/2019 16:19

The problem has been caused by big life things we've paid for on credit, rather than lavish lifestyle.

That's pretty much a lot of people's problems, honestly. Not many people blow it all on fine wine and good times. Most people just spend a bit more than they can really afford, consistently over a long period of time, and take out loans for the "big stuff" that then never gets paid back.

Yes, you are right.

When you budget, you need to save for annual expenses (Christmas, insurance payments, subscriptions, boiler service), infrequently occurring expenses (new tyres, clothes & shoes & haircuts & dental costs, 'milestone' events you want to celebrate) and you need to save for the truly unexpected (job loss). Not just the monthly expenses.

You also need to look at paying down your existing debt within your current means and obligations.

Only then can you spend on holidays, fun stuff and extras.

Your DH is doing the thing that LOADS of people do - he's justifying that he SHOULD be able to have it, because a) he wants it b) he deserves it and c) there's a logical reason to it, of course there is.

But you'll only get deeper in. And as you do, the rates you pay on things will go up.

It's a mindset shift, and you should only consolidate to the bigger loan if the mindset shift is there.

It definitely isn't for your DH, and I'm not sure it is for you, either, not really.

Original poster

Reluctantadult · 27/09/2019 16:29

@perfect, no, what I mean is, with 3 loans, a card and my mum, we'd be paying £600 on debt. If we consolidate the loans and card we'd be paying £280. So we'd put the difference of £300 into savings until we have a float. Then overpay.

OP posts:

Joe2019 · 27/09/2019 16:32

What happens if one of you lose your job, or your marriage breaks down, or you fall pregnant again, or one of you has an accident and can't work? You will be up shit creek without a paddle and lose your cars, your house, everything. I've seen it time and time again . . .. You need a reality check.

NoSquirrels · 27/09/2019 16:33

£6-7k loan @ 10%. Mortgage or a consolidating type of loan are options, If you can borrow up to £10K on mortgage, what's the new payment?

5k car loan with 2 years to go what APR? What are the payments?

9k car loan - don't do it! Obviously. How much will your current car cost to fix?

£5k owed to mum who would prefer us to have 'a plan' for paying it back, even if it's just £10 a month at the mo. Is there any chance your Mum would loan you another £5K, if you formalised a repayment plan with her for the whole £10K, starting low this year (but not too low) and increasing by at least £500 of your £600 childcare savings next year? Use this £5K to a) repair the estate car, and b) do the roof OR use it to pay off £5K of the 10% loan

£700 on 0% credit card with a £9k limit - look to move the existing car loan to this, or look to use it to repair the car. Set up a direct debit just above minimum. Then set up a monthly savings account, at 3% or 5%, there are some deals out there, and save the maximum you can into this. At the end of the 0% term, look for another deal. If the deals have dried up, pay it off with the savings.

Original poster

Reluctantadult · 27/09/2019 16:36

@joe well that's what I'm here for. And getting.

OP posts:

Original poster

Reluctantadult · 27/09/2019 16:39

@nosquirrels my mum isn't able to do that for us I don't think. I will think about whether to ask.

The car isn't fixable unfortunately, I spoke to the garage today, we could do the clutch and the wheels but there is an undiagnosed electrical problem that causes it to lose power that 3 garages including a Renault one haven't been able to diagnose. My garage, who I trust, have advised that its dangerous. It has done it overtaking a lorry before, and pulling out of junctions.

OP posts:

Original poster

Reluctantadult · 27/09/2019 16:40

Can I ask how much money do people tend to aim to have stashed away for a rainy day?

OP posts:

NoSquirrels · 27/09/2019 16:42

Reluctant you are doing well to take the criticism, and I know if your significant other is not on board then it is really, really hard because now you need to be the bad guy.

But it's one of those things your DH will just have to swallow. Not many people can afford a house move with a new kitchen and bathroom, two new cars and young kids in childcare in a matter of a few years. Everyone has to compromise.

I think you need to stop telling yourself it's because you had unfortunate big life stuff, though. Everyone does. You either have to save in advance because Shit Always Happens or you have to accept that you didn't plan well, unfortunately. The 125% mortgage doesn't sound like it's been the real problem if the repayments have been low?

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