Page 1 of I`m swimming in debt, and I think I`m about to sink. Sugestions?

Orange have threatened to send people around the house to take stuff, if I don`t pay up the full amount owed (£120) within a week. Likewise Barclaycard, who want a similar amount by the end of the month, whilst Capital One have been more lenient, but are fast losing patience.

I have become so desperate that I took a job last week through an agency that pays £3.70 an hour! I`m finding all this very stressful, and I`ve not been able to get out a loan to consolidate all my debts because my credit history is so bad. I`m now seriously getting to the point where I`m contemplating offloading some of my belongings.

At 21, I shouldn`t be going through this. I wish I had listened to my parents, I wish I had never touched a credit card, or signed any contracts. I am a fu*king idiot!

What would you do in a situation like this, on a paltry wage?

Don`t (I wish I could make it flash as well) take out a loan or start b*ggering around trying to borrow money to "consolidate" your debt because you`ll only get into a situation of further deepsh*ttedness. Your first step is to do a little something called "accounts", which are boring but may save your life (or at least stop Big Vinnie breaking your legs). Work out your total income (after tax) and how much you need to spend each week for essentials - that`s the roof over your head, gas, electricity, water, phone and the other really important things. Do not include booze, ciggies, DVDs etc. Take your spend away from your income and that`s the amount you have to play with each week. Total it up for the month and make sure you don`t spend any more than that in any one month.

Now, as to your creditors - get in contact with them and tell them you`re having difficulties because of a change in circumstances. They should be sympathetic and help you work something out because they`ll want to get something back off you rather than take you to court and wind up getting you declared bankrupt (which will really f*ck up your credit rating). Cut up all your credit cards except for one (ideally with the lowest owed on it, the lowest rate of interest and the highest credit limit. Try in future to pay the card off completely every month as this will reinforce your credit worthiness.

If you can grub together the cash to pay off Orange and Barclaycard, do it. You can always replace belongings at a later date when you`re more solvent. Again, don`t think of borrowing money to get yourself out of debt `cos it doesn`t work like that. You end up paying just as much money as you owed before, and you`re saddled with the debt for longer. And if you go to a money lender who isn`t under government rules remember he`ll probably have a mate called Big Vinnie.

J Mark Oates

This item was edited on Sunday, 14th September 2003, 03:00

as above.
Never touch those Credit cards, meself, pay with cash or existing credit always...

jc808, the resident dvd.reviewer pious git...

I was in a similair position to you a few years ago, and agree that all you can do is bite the bullet and ring all of your creditors telling them of your situation and sorting out a minimum payment plan with them. Make sure that there is no more interest being added, otherwise you will never get out of debt.

Don`t borrow of Peter to pay Paul.
Speak to Citizen`s Advice, they are always dealing with people in this situation and will tell you exactly what to do next.
Sell everything you don`t need to survive day to day (DVD players, PC etc.)
Cancel Sky, mobile phone contracts
Get ready to spend a lot of time in front of your TV instead of going out.

It may be against your principles (but you know what they say about pride), but charity shops like Marie Cure sell brand new clothes and books for pennies, and if you are serious about getting out of debt, these sort of places can be a life line.

Instead of going out on a Saturday, get you mates to come around and all chip in for beer and pizza (from the supermarket not take away). This way you maintain a social life but it will cost you less than a tenner a time (which is currently about the cost of a taxi when normally going out).

But try not to worry too much - unless Vinnie is coming ;) around. As long as you still have a roof over your head and can afford hot food three times a day, you are still a lot better off than a lot of people, and at least there`s light at the end of the tunnel for you with some carfeul planning for a few years.

You live in a consumer society, bombarded with advertising, allowed cheap interest credit cards, what do you expect!

Mounting debt results, the papers were quoting that the average Brition is now at least £3000 in debt.

My own opinion is that this goverment wants us all in debt or very poor financially, so that you are the new `slave` workers to work to their bid and call.

Credit cards are easy money but will take a long time to pay back.
Low interest makes it look good but if you have money in the bank then its a waste of time cause it make almost no interest, so you cannot live on this. (Unlike the Thatcher era where interest rates were high and most of the South coast of England retired at fifty and lived off the interest, this goverment do not want a repeat of that).
Also rising council taxes, transport and food costs take their toll.

Now you are all slaves to debt, willing to accept low wages, poorer standards of living, to keep a job to offset your mounting cost, IT IS ALL DELIBERATE.

The goverment manipulates to makes the society do what `they` want.

We could all have a higher standard of living it `they` wanted, it is easy to print money when needed (re:- gulf wars), but it is more in their interest to keep the populace as a slave workforce.

Great advice from everyone here, I`ll add my own which admittedly is pretty much a repeat of most of the above:

[list=a] [*] Start keeping accurate accounts (use Microsoft Money or Excel or something if you have it) of your bank balances, and everything you spend coming and going out. This will let you see where its all going and what you can save on.
[*] Cut up all your credit cards, and use a debit card only.
[*] Transfer your credit cards to a new company offering 0% interest for a 6 month period. This will give you a breathing space to sort your affairs out.
[*] Prioritise your payments so you pay off those with the highest interest first.
[*] And as everyone says, contact all the creditors and let them know the situation you are in and that you are trying to sort it out but need a bit of breathing space from them. [/list=a]

Editor
DVD REVIEWER

This item was edited on Sunday, 14th September 2003, 10:06

Having accepted that I was in serious trouble, financially, I spent an afternoon researching the subject (amazing how many hits you get when you type "debt" into Google ;)). Thankfully my research was very successful, and I am now in a position where I am in control again, thanks to the intervention of a chrity called CCCS - like you, I was sinking fast.

The first thing to say to you is don`t panic - put it into perspective. It`s not a life or death situation, it`s just money. Credit card companies and banks are actually right at the bottom of your list of financial priorities at present.

The second thing to say is, to repeat my fellow visitors, do not borrow any more money. This worsens the situation, despite the temptation that it will get your creditors off your back. And definitely do not be tempted by companies that promise to reduce all your monthly payments for you - these are rip-off merchants of the worse order, as you end up owing more money, due to their extortionate monthly fees.

Thirdly, I would hold fire on cancelling "luxury" items like Sky, mobile phones etc, for the moment. Whilst you may have to reduce to lower packages, or maybe convert to pay as you go as far as your mobile is concerned, you don`t need to chuck in the towel on those things right now.

Fourthly, do exactly as Mark says and detail, completely, your income and outgoings. If like me your outgoings exceed your income you need help now.

I mentioned an organisation called CCCS earlier - the Consumer Credit Counselling Service. This is a charity set up, along with one called Payplan, to assist folks like thee and me who are in serious debt. The interesting thing is the organisation is funded entirely by the credit card companies !

Their website is here. Give them a ring to arrange a telephone interview. I found them to be excellent - they don`t ask you why or how you got into debt, all they`re interested in is getting you out of a hole. There is no obligation, and more importantly, (unlike the Baines and Ernsts of this world) no fee whatsoever.

They will go through your income and outgoings and agree what is and what isn`t essential. You`d be surprised at how generous their allowances for things are, hence my earlier advice of not cancelling luxury items - they argue that just because you`re deep in debt doesn`t mean you shouldn`t still expect a decent quality of life. Their calculations are accepted by County Courts as being reasonable. Ultimately they will come to a total figure each month which you can use to pay back the credit card companies, often considerably less than what you pay at present.

Then they will draw up a debt management plan (DMP) for you, should you wish them to assist you and will then contact the credit card companies on your behalf. Because they are respected by the credit card companies, invariably they will be able to negotiatet that interest and charges are actually frozen on your debt, which will obviously help the payback. They do also recommend that you write to the credit card companies to let them know you`re seeking CCCS` assistance.

One thing to be clear on here - as you will be offering reduced payments (and I cut mine down by a third), you will fall into arrears. And this means, regrettably, your credit rating will plummet. However, faced with the choice of having a load of County Court Judgements against your name, or a more amicable agreement with your creditors I know which one I favour. The good thing for you is you are young, so you will be rebuild this credit rating over time.

Finally, let me reiterate : your creditors are the lowest priority, and will be treated as such by CCCS. Things like mortgage or rent, council tax, gas, electricity, water are top priority - everything else takes it place in the queue.

You`ve made the most important step by acknowledging the trouble you`re in (only wish I`d reacted sooner myself), now you need to bite the bullet and act on it.




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Moderator
DVD Reviewer

Webmaster of Area 450 - independent Sampo DVD site

This item was edited on Sunday, 14th September 2003, 10:17

Hear hear Clayts.

Like my good friend, i too sought the advice and help of CCCS. Not only did i speak to a human being - one whom took everything i said on board and was friendly about the whole thing - but also to someone who genuinely wanted to help. I won`t repeat what Clayts has said, but i work in a Credit Management department and i know that creditors would be more willing to take a vastly reduced sum every month rather than sell the debt to a debt collection company at a loss, (the interesting thing is, many of the big companies would rather not do this as they have no financial insurance so they lose EVERYTHING if the customer never pays the agency they pass the debt onto).

If you`re not comfortable about talking on the phone, write to them - it`s important to ensure you are playing your part in letting them know what`s happening, don`t hide from it as they will never know if you don`t tell them. DON`T be scared to tell them. Creditors are not bully`s, and more importantly by law, are NOT ALLOWED to bully you into giving them money. If they keep phoning you at home, write to them and ask them to kindly contact you in writing in future rather than phone, (OFTEL have a series of guidelines detailing what is an acceptable level of phone calls and what is taking the p***), they must abide by the rules and must respect the wishes of every customer they deal with.

With regards to mobiles, stop using it and switch to pay as you go. The conveneince of a contract is nice, but costs you money which you REALLY don`t NEED to be spending. Many people are blissfully ignorant to the fact that thay just pay the line rental and VAT and then don`t bat an eyelid. What you`re actually paying for is the huge bill the companies run up buying the latest handsets. All you`re essentially doing is paying the bill for that - as people have always said, "Exactly WHAT line am i renting??!!", it`s a mobile for gods sake! I ditched the contract thing ages ago, i may run out of credit, but at least i know i won`t have a bill.

And lastly, get used to paying for everything in CASH or with your debit card. You get far more gratification when you pay for something from your hard earned and not on interest free or on a credit card. When it comes to selling it on, you`ll think far more about how much you`ll let it go for rather than just accepting a willy nilly price as you paid on your credit card and it "doesn`t matter".

Initially things will have to change, and you must be prepared to accept it - and as Mark says, you can always buy this months DVD in 6 months as it won`t disappear off the shelves. Life is full of ups and downs, and at your age you have the opportunity to do something good about it, which may take a few years to put right but just think in around 4 years you`ll be let "out of jail" and the noose will have gone from round your neck.

It`s sad that money lending companies will throw money at literally anyone these days, Capitol One will allow people with horrendous credit ratings to have a credit card, there`s loan companies who`ll do the same - but at the end of the day, debt is bad and it will take a big effort from yourself now to ensure you don`t get in this little mess again.

Good luck mate ;)

All the best

Westy

Site Technical Help Editor and Moderator

Home Cinema Editor - Area450

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All fantastic advice! The only thing that I could add from similar experience is that this site is fantastic!

http://www.fool.co.uk/index.htm

It has forums and advice all related to money and the best finacial deals that are available to make you financially adept in the future.

as a footnote,
the job that is paying £3.70 per hour is breaking the law, minimum wage is £4.20 per hour

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"It`s proper Bo a` tell thee......"