Moneymakeover Money Makeover - Debt Being Serviced, but no funds for living!

Hi all

Please be kind!

Myself and my husband are in some debt, which we are servicing without trouble, but we are left with no money for anything else. We both just completed Masters which we paid for in part with our Credit Cards, and we have one outstanding loan each.

I applied for a consolidation loan, which will ultimately free up approx 900 per month for us, i.e. combining all our loans and CC (and closing the CCs). We were approved in principle, but the underwriter said no because they didn't like our spending habits on the CCs.

My question is: is this within the remit of an underwriter? We are fully up to date with all our debt commitments, we are looking for a consolidation loan so we can live life a bit more, and do more stuff with the kiddos!

Thanks a million guys!

How much do you owe? What are you earning? Are you members of a credit union and if so have you tried there for a loan?
What about looking for a 0% credit card transfer for a few months to get the debt down. ( obviously don’t use the cards)

Hi Niceoneted, thanks for replying. We owe 60K between us, and we have combined earning of 180k (both permanent public servants). We do have a credit union account, but no savings, and the interest rates are amongst the highest out there.

Hi Clubman, thanks for replying.
I'm not really looking for a money makeover, we have done it down to the last €€ ourselves.
We could continue as we are, but I'd love to free up some cash for fun stuff, I can't remember the last time I could afford to do something fun with the kids ( and I know this is a first world problem, and there are people much worse off than us).
The underwriter seems to have made their decision based on our spending habits, rather than our perfect repayment record, and current income/expenditure/capacity to pay. I just found it strange is all.

That's exactly what underwriters do, having been one myself for quite a while I would be very interested in spending habits etc that landed someone in the position of needing the consolidation loan especially if they are recent rather than some historical problem that landed a person where they are. There has to be very good reasons to override past performance and I would imagine the underwriter is working to strict criteria.

For that reason alone I would also second trying a CU as they are far more likely to give you a proper hearing as to why you ended up in that position and can make a decision locally as opposed to having a Head Office rules situation.

WHATNOW said:

My question is: is this within the remit of an underwriter?

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Of course it is, your spending habits are what got you here, not your current ability to service the loan. And you are already feeling the pinch which suggests that while you are servicing it now, you are not doing so comfortably

WHATNOW said:

We owe 60K between us,

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WHATNOW said:

I applied for a consolidation loan, which will ultimately free up approx 900 per month for us, i.e. combining all our loans and CC (and closing the CCs). We were approved in principle, but the underwriter said no because they didn't like our spending habits on the CCs.

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€60k is a lot of short term debt to rack up. How many loans and CC's do you have?

If you step out of your own shoes for a second and look at your spending, you should be able to see why the underwriter rejected you instead of questioning their remit to reject it.

From the underwriters perspective, freeing up the €900 might mean turning this short term debt into a medium term debt. And it carries the risk that you continue spending on the credit cards and add to the total.

At a minimum, if you don't want to do a full moneymakeover, you should at least detail your loans, credit cards, interest rates, term length and the proposed consolidated loan, interest and term.

There might be other ways to help you free up cashflow

Personal details

Your age: 48
Your spouse's age: 47
Partner's age if not married:

Number and age of children: 2 (11 and 8)
2)

Income and expenditure
Annual gross income from employment or profession: 88k
Annual gross income of spouse/partner: 88k

Monthly take-home pay: Total household 8000

Type of employment - e.g. Employee or self-employed.: 2 Public Service
Employer type: e.g. public servant, private company.

In general are you:
(a) spending more than you earn, or
(b) saving?
Spending more than we earn

Summary of Assets and Liabilities
Family home value: 430000
Mortgage on family home: 195000
Net equity:

Cash:0
Defined Contribution pension fund:0
Company shares :0
Buy to Let Property value:0
Buy to let Mortgage:0

Total net assets:0


Family home mortgage information
Lender: UB
Interest rate Tracker +2.25
Type of interest rate: tracker
If fixed, what is the term remaining of the fixed rate?
If tracker, what is the margin e.g. ECB + 1% - +2.25

Remaining term: (Original term is not relevant) 22 years
Monthly repayment: 1185

Other borrowings – car loans/personal loans etc
Joint Personal Loan 33000
Spouse Personal Loan 17000

Do you pay off your full credit card balance each month? No
If not, what is the balance on your credit card? 12k, and 5k

Pension information

Value of pension fund:

Buy to let properties
Value:
Rental income per year:
Rough annual expenses other than mortgage interest :
Lender
Interest rate
If fixed, what is the term remaining of the fixed rate?

Other savings and investments:


Other information which might be relevant

Life insurance:


What specific question do you have or what issues are of concern to you?
I want to consolidate my debts to give me some disposal income so we can live a little!

What are your weekly / monthly outgoings for things like food / utilities / car tax / petrol

If you are in this much debt you need to start with the everyday spends and get a handle on that to free up cash, you seem to have a decent amount of funds coming in.

Do you have any budget like this you can share with us?
(OP for context this is my monthly budget for this month when I get paid on the 15th to do me until the 15th August)

WHATNOW said:

Joint Personal Loan 33000
Spouse Personal Loan 17000

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WHATNOW said:

If not, what is the balance on your credit card? 12k, and 5k

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WHATNOW said:

Family home value: 430000
Mortgage on family home: 195000

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What interest rates are you paying on the personal loans?
What interest rates are you paying on the credit cards?

I am guessing that even a credit union would have lower rates than the credit card companies, if you can borrow from them without having to keep shares at the same time.

WHATNOW said:

Lender: UB
Interest rate Tracker +2.25
Type of interest rate: tracker
If fixed, what is the term remaining of the fixed rate?
If tracker, what is the margin e.g. ECB + 1% - +2.25

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I presume that this mortgage is now owned by AIB?

Have you spoken to AIB about it?

They won't consolidate the personal loans onto your mortgage but they might reschedule your mortgage which would lower your monthly payments. It would help a bit.

You could try one of the non-bank lenders to see if they would take a switch and give you additional money to clear your personal loans. But check the interest rate. You could ask a mortgage broker to see if this is possible.


The others are Finance Ireland and Moco

Brendan

Has the masters increased your salary, or will it in the near future, and will that give more wriggle room in the budget? What portion of the debt is masters fees or related expenses?

Sorry for the delay replying. I can only post once an hour because I am new.

@ Blackrock,
Thanks for replying. We have both just finished our Masters (self funded), so the majority of the spending relates to fees, travel, exams etc

@Brendan Burgess: The Joint Loan is 6.7%, Spouse's Loan is 6.5%, Both CCs are 22.90%. My mortgage is ECB +2.25%

@misemoi: hopefully, I got my current job because of it (or at least I was eligible to apply), I am on the lowest point of the scale, so there is room for wiggling! The majority of the debt is study related.

WHATNOW said:

Income and expenditure
Annual gross income from employment or profession: 88k
Annual gross income of spouse/partner: 88k

Monthly take-home pay: Total household 8000

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€8K p.m. seems low unless you're making pension/AVC and/or other payments via payroll. According to this calculator your net should be closer to €9K p.m. on a gross of 2 x €88K public service salaries.


Plus you presumably get €280 p.m. in Child Benefit?
Are you sure that your tax credits are correct?

Sarah Ryan said:

Do you have any budget like this you can share with us?

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Apropos of this...

WHATNOW said:

@ Blackrock,
Thanks for replying. We have both just finished our Masters (self funded), so the majority of the spending relates to fees, travel, exams etc

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ok, i assume then you have done a cost benefit analysis on the masters and its impact on both your future earning potential because of it.

If thats the case first place would be to seperate debt related to the further education and debt related to over spending to ensure you arent conflating the two, then prepare a monthly detailed budget. The 22% credit card interest needs to be addressed asap even if its taking advantage of a 0% balance transfer for 6 months just to give you time to try get your finances sorted.

Blackrock1 said:

If thats the case first place would be to seperate debt related to the further education and debt related to over spending to ensure you arent conflating the two

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I don't understand this? What difference does it make what the debt is related to once it has been incurred?

Blackrock1 said:

then prepare a monthly detailed budget. The 22% credit card interest needs to be addressed asap even if its taking advantage of a 0% balance transfer for 6 months just to give you time to try get your finances sorted.

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The problem with the 0% card trick is that they might well be turned down for one given their current debt situation. Plus, someone in the bad habit of racking up credit card debt might see such a respite as an excuse to incur even more debt.

ClubMan said:

I don't understand this? What difference does it make what the debt is related to once it has been incurred?

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its one thing to make a conscious decision to get into debt with a specific goal in mind, in this case further education, its another to have also racked up more debt on general lifestyle spending and not knowing how much of the debt relates to that.

But that's irrelevant once the debt has been incurred and needs to be serviced. Just like it's generally not a good idea to take a silo approach to the household finances (e.g. ring fencing the CB for "the education fund") I don't see much merit in taking a silo approach to debts. Other than to tackle the most expensive first or deal with mortgage issues if in danger of losing your home.

ClubMan said:

But that's irrelevant once the debt has been incurred and needs to be serviced.

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i disagree, how it arose is very important as its an issue that will need to be resolved to manage future finances.

Hi all,
Thanks for all the feedback. I've always had a CC, usually with a 1k limit, and a solid credit history. We took the plunge to do the Masters as it will definitely provide more opportunities for us in the future (in fairness my Masters got me across the line with my current role).

Again, we can continue on as we are. We havent used either CC in months, (apart from a vet bill ), but we also havent had a holiday since before the children were born!

The plan was always to get a loan to clear the CCs when we could, but with the study loans as well, we thought bundling it all together would make more financial sense. My plan is to go back to my 1k limit CC for emergencies, etc