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Financial worries or just looking for better value for money? Consumer champion Fergus Muirhead can help
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Q MY PARTNER and I are both in full-time employment but have struggled with credit card debt following the break-up of a previous relationship. As well as the credit card debt, I have a mortgage of £120,000 on my house at a cost of just under £700 per month. I also have a second charge of £60,000 and this costs me nearly £650 per month. We always seem to be right on the edge at the end of every month but I can’t seem to get any help from my bank. Do you have any suggestions? A CAN I start by saying that your situation is far from unusual and the fact that you have written to me about it suggests that you are seriously looking to resolve the issues you are facing. Speaking to someone else about your debt is often the first step you need to take to improving the situation. Bottling things up and hoping they will go away only increases the stress that you are no doubt feeling at the moment.
In terms of where you go from here, I would make a couple of suggestions.
The first is that you speak to a mortgage broker to see if he or she can arrange a new mortgage that takes in your current mortgage and your second charge loan. This new loan should be arranged over as long a period as possible.
Some lenders will now lend beyond normal retirement date. They may be able to do this in your case if you are going to be in receipt of a guaranteed pension from your employers.
I know you said your existing bank won’t help, but there may be someone
Take advice as soon as you think you have a problem making payments on any credit cards or other loans. Keep a note of everything you spend for a month. It’s a great way to help you budget. else out there who will take a different view of your circumstances. And it’s always at least worth asking the question.
In one of your emails, you told me that some of your current loan is repayment
and some is interest-only. It’s unlikely that you would find a new lender to give you an interest-only loan, but even if you have to arrange a new mortgage, the fact that you are doing it over a longer period of time could still save you money.
At the same time, I would have a word with your credit card companies and tell them that things are tight at the moment and that you are struggling to make ends meet every month.
Tell them you would like to see if there is a way that you can reduce your monthly payments.
They may ask you to complete an income and expenditure statement and if they do, you need to be as honest as possible and include everything that you are currently spending every month.
Another option, if none of the above works, or if you feel unable to approach all of your creditors yourself, or if you have spoken to them and they have told you that they are unable or unwilling to help, is to speak to a money advisor, perhaps at Citizens Advice Scotland or the like.
Ask them if you would qualify for a Debt Arrangement Scheme.
This is a way of repaying all of your debt. It is not written off, but has charges and interest frozen so you might find payments lower. And the repayments can be arranged over a period of time that suits you and your finances.
It is a formal agreement and is part of a scheme arranged via the Scottish Government, so it should be recognised by all of your creditors.
The starting point is to speak to an approved money advice worker who will look at your circumstances and tell you whether you are likely to qualify.
You should also look at your spending. We would all benefit from carrying out a budgeting exercise on a regular basis.
From time to time, we spend money that we don’t need to spend, and we don’t always have our regular outgoings arranged as efficiently as they could be.
So keep an accurate note of everything you spend over a period of, say, a month and see if there is anything that is unnecessary.
Look at all the direct debits you have coming out of your bank account every month for insurances and utilities and see if there is anything there that you can arrange on more favourable terms.
Most of us could save a little every month if we carried out this exercise.