So I have over the last few years after separating from the ex Bought a house that needed a lot of renovation and have as a result built up a decent amount of debt that is starting to affect my credit rating.
I am just about to remortgage at the start of October and waiting to see what happens with interest rates tomorrow before sorting out what deal to go on.
The break down of debts etc is somthing like this:
13k loan
15k on credit cards (Total amount paying out p/m £700)
121k mortgage. ( £636)
New mortgage available (131K)
Im actually considering puling out of my pension because what is the point in paying £200 a month from my salery if im having trouble paying the bills??

Help and advice needed please.

What’s your income dude? Otherwise we can’t know if these figures are manageable or not.

I’m guessing if you’re considering leaving your pension, then they’re not.

You know the drill, I’m sure. Cut unnecessary expenditure, get any low-interest-rate balance transfer deals you can, get rid of any expensive luxuries you can do without (it’s amazing how many people are struggling with debt but have iPhone, Sky TV and an Audi on the drive – not saying that’s you though!), pay down debt with highest interest rate first.

Don’t count on being accepted for the remortgage if your monthly income & expenditure is “maxed out”.

Do a proper budget and if you’re happy to, post it up here.

When I was in debt, the Debt Free Wannabee forum on Moneysavingexpert was a real help.

Good luck

Edit: The above advice is assuming you can actually meet your minimum monthly payments. If you can’t, don’t leave your pension scheme in order to make up the shortfall. Come back and tell us and I’ll tell you what happens next. And it’s not that scary.

I’m reading that as reducing monthly outgoings?

If you can get £10k of the highest interest into the mortgage, do that, it’s cheaper thatn a loan.

For unsecured, normally a bank will give you about £20k in total for loans, so perhaps consolidate the rest, if you speak to them nicely. A £20k loan shoud be about £350 pm in repayments, allowing you to overpay if you can, but manage if you cant.

Firstly you are doing the right thing by trying to address the problem

Get rid of the expensive stuff first – credit card and loan – if you put these on fhe mortgage don’t be fooled by thinking “its taken care of” as repayment takes a long time (or never if its interest only). Even if payments are relatively high look at repayment mortgages. Look at one new loan to repay credit cards/loan and compare to putting that on the mortgage.

Stop using your credit card or at the very least pay it off in full every month.

Edit: as above don’t leave your pension if you can possibly afford it, better to cut down on lifestyle today.

Try and be positive and don’t feel crushed by debt, from tje sounds of it you’ve added value to your home so at least some of the spending has been a genuine investment

Edited. Wasn’t making much sense.

So salary is 29k and I also get 4K from having a lodger in my house.
Total gross income (Including Lodger) is £2190 and outgoing after all bills is £1790 – leaves me with £165 spare for emergencies which is always used.

Does bills include food/fuel etc?

https://www.moneyadviceservice.org.uk/en

https://www.nationaldebtline.org/

https://www.citizensadvice.org.uk/debt-and-money/help-with-debt/

Personally I wouldn’t pull out your pension as you are credit rating is shot anyhow, paying off your debt now with your future income, still leaves you in adverse credit now and no secure future income.

You need to look at consolidating the debts. Rip up the credit cards now and start living within your means.

You don’t need to tell us how much you earn, what you do need to do is work out your income v expenditure.

It could be you need to take a consolidating loan that you have for a number of years. You will play over the odds for this, but credit is cheap at the minute.

Once all credit cards are cleared and binned/loans cancelled you need to then start cleaning up your credit history, which will take 6 years. When you credit improves you can then start taking out loans (if credit is still cheap) to pay off the more expensive consolidated loan.

Very few mortgage companies give out cash these days, especially to people with credit history. Plus if you do now have credit history you will not get mortgages at good rates.

Speak to the link above for proper help.

Discipline and sacrifice is the way forward unfortunately and being very savvy about what you do.

Does bills include clothing, haircuts, travel, holidays, annual expenses like car servicing & MOT?

Use the SOA calculator in my link.

I know it’s a pain and don’t mean to be patronising but it’s the first step in understanding your full situation and helping others to give informed advice.

Consolidation might make sense but isn’t always the answer. Many, many people find they consolidate then still struggle, so continue to borrow just to balance the monthly budget, then end up with the consolidation loan plus a load of new debt.

It obvs makes sense to get on the lowest interest-rate deals you can, but people in the OP’s position can rarely access the best deals.

Consolidation might make sense but isn’t always the answer

True – It can be worth ring cc company, and saying you can not pay debts. They then (I think) have to offer a reduce rate repayment schedule. Again its all about weighing up the options, being very astute and savvy as to the best thing to do. That is where debt counselling will help

Indeed but we need the OP’s SOA before we can give concrete advice. He might be able to make the monthly minimums as he is (but from what he’s said so far, I doubt it)

You could find another credit card with an interest-free balance transfer offer – that saves a lot of cash. Or as above – ring creditors. They don’t want you to go bankrupt.

They then (I think) have to offer a reduce rate repayment schedule.

They can do this, but expect it to appear on a credit report.

If you do this before your re-mortgage, expect it to be an issue.

The highest interest rate is likely to be on the credit cards. First priority should be to switch these to interest free cards if your credit rating allows. e.g. Virgin Card. It might be worth doing this before the remortgage as the mortgage will be based on affordability.

With the mortgage it is likely that you will want a fixed term. To some extent a rate drop is already priced in to these at – at least for longer term ones (5 to 10 years). So I doubt rates will change much after Thursday. Consider extending the term to the maximum possible to reduce the monthly payment. Also consider, taking a bigger mortgage will affect your loan to value and you may end up on a higher rate.

The pension is tricky. If your employer makes a significant contribution than you are effectively throwing money away. Also, if it is a final/average salary than there can be significant simplification from taking a break in service.

Overriding all the above is that – you should do anything you can to avoid missing or making late payments – that will have a huge effect on your credit rating and things will spiral out of control.

Consider a cash in hand pot washing type job and live off that (food and trivial expenses) whilst chucking all your salary at bills and the debt

OP has already said he has bad credit.

From that point on, it is all about managing that 6 year period until debts disappear off your credit file.

A credit agreement with an existing lender still leaves you with a mark on your credit file. So if you agree to pay cc off over 10 years, it will be 16 years before the file is clear.

If you clear cc debt tomorrow, and take out a new consolidated loan, then the 6 years start counting immediately.

However as above it is all dependant on potential to repay.

With the pension I feel as if the money would be better off paying away the debts as i can get back into the pension when I am not paying out vast amounts of money on interest. The only problem is oi have a final salary pension that everyone says is ridiculously good and mustn’t loose.

The only problem is oi have a final salary pension that everyone says is ridiculously good and mustn’t loose.

You honestly need to ask yourself if you can afford to live in your house.

I nearly lost my house 20yrs ago, I thought things could never improve, but they did, it just takes hard work, and a lot of discipline

They then (I think) have to offer a reduce rate repayment schedule.

It doesn’t matter if they offer it or not. You work out how much you can afford to pay each creditor (pro rata from what you have left after your living expenses) then tell them that’s what they’re getting, and request interest stopped. They will all do that, although some will require more persistence than others. They will all want to see your SOA.

Credit files will be marked with “AR” (arrangement to pay) for each month the plan is in place, then “S” (settled) when settled. Yes it will screw your credit for 6 years from the final AR (or any other negative marker they use).

Although unpleasant at the start, most people come to look back on their years in the credit wilderness as a positive thing, in which they built a lifestyle around living without credit.

Or as above – ring creditors. They don’t want you to go bankrupt.

IME that’s not always a good place to start. It just sets alarm bells ringing with them when there may not be any need at this stage.

Start with the financial advice charities – https://www.stepchange.org/

And as has been said above the MoneySavingExpert forums are awesome, these especially – don’t be put of by the title of the bankruptcy forum as there is some brilliant advice to be had…

http://forums.moneysavingexpert.com/forumdisplay.php?f=76
http://forums.moneysavingexpert.com/forumdisplay.php?f=136

With the final salary pension, if you take a break and then rejoin later. Normally you will end up with two pensions. One with a final salary based on you salary when you left and one on your true final salary. Onec you take into account that your contributions are tax free – it really is not is nto a good idea to withdraw unless you can help it.

How bad is your credit rating – have you missed any payments?

It is worth trying to do some eligibility checks on credit cards before you apply. Credit card eligibility

Sell house move somewhere cheaper, pay off debt. All problems solved?

Credit rating is currently fair so not in the poor category but obviously heading that way. With the mortgage I can switch to a deal with my current provider immediately and the new rate will start in October. This however i cant extend and add any debts too as its just the current amount on the remaining term.

You honestly need to ask yourself if you can afford to live in your house.

No. No he doesn’t need to ask himself that.

If the OP needs to enter into an arrangement to pay with his unsecured creditors, he will not be expected to sell his house to make up the shortfall. His mortgage payments (and his pension contributions for that matter) will be accepted as legitimate expenses on his SOA.

The OP’s home and pension are not at risk because he’s overextended himself with unsecured debt.

At the moment it sounds like you are a good customer to the credit card companies – you are paying a high rate an not missing payments.

What is the rate, fixed term and loan to value of the proposed mortgage?

You honestly need to ask yourself if you can afford to live in your house.

No. No he doesn’t need to ask himself that.

Yes he does. If there is a good chunk of equity in the house, then selling, moving to something lower priced and clearing debt should be considered. With a view to a better house when debt is cleared.

Better to do that than running into quick arrangements with debtors as this will knacker his credit rating for years.

It is worth trying to do some eligibility checks on credit cards before you apply

That is a bad idea. It will offer a guide, however each company have their own criteria which they apply when they check your credit rating. Every time someone checks your credit score it puts a marker on your credit file. If you do too many credit checks this creates a negative marker in itself so it becomes harder and harder to get credit.

Mooly – How much will switching save you per month? Also they say you can switch straight away? Have they already credit checked you? It is ok the nice helpful sales person saying you can swap, but the application will still go for a credit check, and could still be turned down. The sales staff never explain (or understand) this bit

I have learnt this one from bitter experience myself.

FunkyDunc – read the details on the link the pre-checks do not have a significant effect on your credit rating and are based on the lenders criteria. The point is that you find out which cards yo apply for before you make full application to avoid having too many searches on your file.

Fair enough, but people do appear un aware that just applying causes negative credit.

You could find another credit card with an interest-free balance transfer offer

And to clear a £15k credit card debt how many credit cards do you think he will need to apply for. With a not so good credit score what are you likely to get as a credit limit – £2k maybe.

Applying for more credit cards is not the answer. And please cut the credit cards up, if you start clearing the debt and still have the cards you will start using them again and be in an even worse financial position in a few years.

Well done addressing the issue, seems it is the cc debt that is expensive. Is there any chance of peer to peer lending to cut the rates.

Just checking you not paying tax on the private rent – its free under the rent a room scheme.

If u do stop the pension can you buy back the break later.

good luck btw we have all been there

Mooly, I used to work for HBOS bad debt. A couple of tips which will help. Do a proper income/expenditure and list everything you pay for (including fuel, haircuts, shopping etc)
Prioritise your bills. Mortgage, utilities etc.
Contact your credit card company/ loan company. They really will listen and want to help. They will do a reschedule on your loans and offer you smaller payments over a longer period. They should also halt any interest on your accounts. They will just want the debts paid.
You seem to have a good income, and by acting early you can sort things out now.
Oh, and don’t stop paying into your pension.

Yes he does. If there is a good chunk of equity in the house, then selling, moving to something lower priced and clearing debt should be considered. With a view to a better house when debt is cleared.

Better to do that than running into quick arrangements with debtors as this will knacker his credit rating for years.

Selling his house is an extreme solution to an unsecured debt problem.

Every time someone checks your credit score it puts a marker on your credit file.

“Soft searches” leave no credit file marker, but nor do they fully assess affordability/true likelihood of acceptance.

Look – we all need to calm down 😀

OP, take it from someone who has been in your situation, with similar figures, and has come out of it the other side.

You will not need to leave your pension scheme (you shouldn’t) or sell your house.

Complete the SOA I linked to, with honest and precise figures. Post it here if you like, but better still, post it on the MSE forum where people who’ve been through the same will give you valuable advice. There are ten new “Help I’m in debt – here’s my SOA” posts every day on there. It’s all standard stuff!

Applying for more credit cards is not the answer.

This

They will do a reschedule on your loans and offer you smaller payments over a longer period.

Does that harm your credit rating?

Applying for more credit cards is not the answer. And please cut the credit cards up

Contrary to popular belief, not everyone with lots of credit card debt is a compulsive spendthrift with no self control. He’s not necessarily flashing the cards all over the place.

No, the only time your credit rating is affected is if you miss several payments or end up down the ccj route.

Does that harm your credit rating?

Yes. But IF (and it’s still an if because we haven’t seen the OP’s figures) he can’t meet his monthly unsecured debt repayments, then this is going to happen. It’s not the end of the world.

No, the only time your credit rating is affected is if you miss several payments or end up down the ccj route.

No. If you enter into a debt repayment plan with a creditor, they will almost certainly record an AR marker on your file for each month you’re on the plan and whatever you pay them does not meet the minimum pyt as set out in the original credit agreement. This will adversely affect your ability to obtain credit in the future.

currently your ceredit rating is impacted by the amount of credit you have, not by missed payments, correct?

If you can reduce the overall monthly repayments, offset over a longer time, that will give you money in your pocket to live on. The only way to do this without impacting your credit rating is to either arrange something with the bank direct, or consolidate credit card debt. Credit card companies won’t be interested in rearranging debts without impacting your credit rating.

but yes, cut up your cards and don’t get any more credit once you’ve arranged that.

If you find you’re unable to do this, then you will need to contact all of your creditors and tell them you’re struggling to make repayments.
Easiest way to do this is to visit CAB, they will run through income and expenditure, and proportion the remaining balance across the debtors.
your credit rating will be shot, but that’s not as bad as you may think, I mean, you’ll not be looking for credit anyway.
CAB will generally manage the voluntary repayment schedule and the debtors, writing to them to arrange.
Stepchange are good too, but CAB would be the first port of call.