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LadyDay
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Posted: Thursday March 2nd, 2006 20:57 |
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hi people
i think debt is one thing we all aim not to have
so i thought i start a thread where we can give advice to people.
the best advice is free advice. afterall people who are in debt will only end up in worst debt if they go to one of those tv advertised debt/loan consolidation companies.
http://www.fool.co.uk gives good advice on money but still just ignore everything on credit...avoid credit where you can
http://www.cccs.co.uk/ free debt conselling a charity their website gives advice on budgeting etc aswell as debt advice plus you can call them
http://www.nationaldebtline.co.uk/
I hope the village will add to this.
im hoping this thread will help someone who may need the advice
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MCP
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Posted: Sunday March 5th, 2006 09:41 |
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Here's another site that I've found to very useful as well.
http://www.debtline-online.co.uk/
Also the Citizens Advice Bureau can help as well.
http://www.citizensadvice.org.uk/winnn6/
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Le Moor
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Posted: Sunday March 5th, 2006 10:25 |
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One way to alleviate debt is though consolidation.
This is where you re-mortgage your home and pay off all your debts with the cash raised.
eg you have £100,000 mortgage and a house worth £200,000. Your total debt is £15,000.
You then remortgage for £115,000 releasing the £15,000 to repay debts.
The advantage of doing this is that your debt is now spread over the term of your mortgage which could be much longer than the original debt term and the interest rate will more often be much lower. This in turn would mean your monthly repayments overall reduce considerably giving you much needed monthly disposable income.
The disadvantages are now that if the repayments of the £15,000 debts are over a longer term then the overall payments and interest you pay maybe more over the term of your new mortgage. Also if your debts were unsecured before, by putting them onto your home they have now become secured. This would mean your home would be at risk of repossession should you not keep up the repayments.
Hers an example of how it could work and the cost comparisons.
Customer A has
Credit card £5000 outstanding, Loan 1 £5000 outstanding, Car Loan £5000 outstanding. The average interest rate is 13.9% (assuming)
His monthly reapyment on all three debts amount to £416 per month (138.88 per month each) and he has 3 years reamining until they finish.
In 3 years time he would have paid £15,000 in repayments and interest.
Now lets look at the same debt added to the mortgage:
By adding the £15,000 to his Capital and repayment mortgage the new interest rate paid on the debt is 4.5%. (Customers assumed mortgage interest rate)
The Cost Per Thousand of a 4.5% interest rated mortgage with 20 years left is £6.33. This means for every thousand pounds borrowed on his mortage it will cost the customer £6.33
Therefore to work out how much, per month, it would cost to add the £15,000 to the mortgage, we would divide £15,000 by 1000= £15
If we then times this by the CPT we get £ 15 X £6.33 cpt =£94.95. (So assuming rates stay the same for the full term of the mortgage) it will cost the customer £94.95 per month to consolidate his debts into his mortgage as opposed to the £416 per month he's currently paying (see above)
The total cost of that £15,000 over the term of his mortgage would be
£94.95 X 12 months X 20 years =£22,,788 in repayments and interest.
Obviously as his mortgage rate varies throughout the 20 year term this final figure would vary too.
Therefore to conclude this example, by adding £15,000 to the mortgage, in total the repayments would be £22,788 as opposed to his current way of paying them over 3 years which would amount to £15,000 in total.
The way to judge whether it is right for you is by saying "Ok if i consolidate debt into my mortgage over 20 years its £7788 more expensive in total (£22,788-£15,000=£7,788) However i save myself £321.05 per month for the next 3 years (£416-£94.95=£321.05))
Which is a bigger priority?
Last edited on Sunday March 5th, 2006 12:25 by Le Moor
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Incognito
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Posted: Sunday March 5th, 2006 11:52 |
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As one person told me, the worse thing that can happen with his debt is that he dies before paying it back.....and that's a problem for the system not him....he's on -25k and counting and lives life for living.
For debt avoidance, simply live within your means and stop chasing vanity.
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Le Moor
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Posted: Sunday March 5th, 2006 14:14 |
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Incognito wrote: As one person told me, the worse thing that can happen with his debt is that he dies before paying it back.....
Why is that the worse thing?
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chika
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Posted: Monday March 6th, 2006 08:18 |
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Another good website is
http://www.moneysavingexpert.co.uk
This is good even if you aren't in debt and just want to save a few pounds for an extra holiday.
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LadyDay
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Posted: Sunday March 12th, 2006 10:22 |
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le moor why consolidate?
not everyone has house and mortgage
plus those paid for debt consolidation companies just add to your debt
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Think outside of the box...Think in spirit
Act as if it were impossible to fail!!!
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facetygal
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Posted: Sunday March 12th, 2006 12:08 |
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| I'm with a debt management company, I owe grands to bare companies, but I only pay them a pittance. It's ideal for now but there is no limit to how many years it could go on for, so I have to work out a way I can clear the debts once and for all. What I'm trying to do is put money aside every mth so when I have a decent amount I can do a full and final settlement on the companies I owe small amounts to. Obviously it's not good to get urself into that state in the first place, but tings happen.
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Le Moor
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Posted: Sunday March 12th, 2006 12:58 |
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LadyDay wrote: le moor why consolidate?
not everyone has house and mortgage
plus those paid for debt consolidation companies just add to your debt.
LD I agree, obviously if you dont have a house or mortgage then you cant consolidate like the example above.
I understand where you're coming from and there are some examples of consolidation which aren't the ideal solutions. Such as with companies who offer the new mortgage on high interest rates and expensive get out penalties. (People with CCJs and defaults have to go down this road as they cant get a standard mortgage from a main Lender)
However the people who usually end up making their debt situation much worse are the ones who consolidate, free up spare disposable income then later take out more loans and credit on top.
Consolidation can be a good idea if you stick to your original plan and use the newly created disposable income wisely. For example if you take my example above. Customer A saved himself £321.05 per month by consolidating. If he then re-paid that money into his mortgage by way of overpayments, he would not only reduce the term of his mortgage by years, but also save himself thousands of pounds in capital and interest repayments.
As i said at the end of my post it depends on what your priorites are. Whats the point of struggling for years to meet payments when you can free up much need montly cash and re-build your financial life. For some that is the priority. If its not then to be patient and get the debt out of the way is for some an ideal solution. Lucky if you have that luxury but this thread remember is about debt advice. I associate this with people in trouble hence consolidation suggested as a viable option.
Last edited on Sunday March 12th, 2006 13:05 by Le Moor
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LadyDay
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Posted: Sunday March 12th, 2006 18:04 |
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facetygal wrote: I'm with a debt management company, I owe grands to bare companies, but I only pay them a pittance. It's ideal for now but there is no limit to how many years it could go on for, so I have to work out a way I can clear the debts once and for all. What I'm trying to do is put money aside every mth so when I have a decent amount I can do a full and final settlement on the companies I owe small amounts to. Obviously it's not good to get urself into that state in the first place, but tings happen.
i think the best advice is free advice
http://www.payplan.com
http://www.cccs.co.uk/
the free companies do the same as the fee paying companies
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I am too blessed to be stressed and too anointed to be disappointed!
Think outside of the box...Think in spirit
Act as if it were impossible to fail!!!
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LadyDay
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Posted: Wednesday May 24th, 2006 23:06 |
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| bump
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I am too blessed to be stressed and too anointed to be disappointed!
Think outside of the box...Think in spirit
Act as if it were impossible to fail!!!
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Soulstarr
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Posted: Monday May 29th, 2006 15:22 |
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Ok i have a question.
Is there a way to consolidate your debt if
a) you're not a home owner
b) your debt is considered relatively small
c) your monthly income is less than half of your monthly outgoings?
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Kibibi
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Posted: Monday May 29th, 2006 19:35 |
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I paid off what I needed to pay off this year and I was strict, now I can go back to saving.
The best thing for me was doing a balance transfer. It places all your bills together and you make one payment, with no interest for a certain period. At first this sounds like you would be paying out more, but in fact you pay out less (I did) and in a shorter period. The card I had gave me nine months interest free and it was good.
SS, you should see if this works for you. Seach for a card that will give you interest free balance transfers for a certain period (Egg and Virgin are good), calculate all your debt together and divide it by the months they give you-to see if you can realistically pay that each month.
If you need longer, just switch to another card (e.g you use egg, they give you nine months but you need twelve. At the end of the nine switch to Virgin)
*SS if your monthly income is less than half your monthly outgoings you will have to see where you can make cutbacks...not just for the card thing, but in general.
Last edited on Monday May 29th, 2006 19:36 by Kibibi
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