Seeking to reduce debt

Hi, I am looking for advice on reducing my debts. I am new to this but have filled out as much information as I could to give an overview of my income and expenditure. Grateful for any advice. Thanks.

Age: 33, Single

Annual gross income from employment or profession: €52,000 (approx €2900pm after tax, vhi, etc) – due to reduce further with new pension levy


Type of employment: Semi State Organisation in a secure job

In general I am spending more than I earn

Rough estimate of value of home : €220,000 (one bed, no option for rental income) (bought for €257,000)
Amount outstanding on your mortgage: €236,000 – monthly payment finally down to €824.31 which is lowest I have paid since getting the mortgage 2.5years ago

What interest rate are you paying? On a tracker mortgage: rate is 3.25% over a margin of 1.25%

Other borrowings
Personal Loan - €13,498.37 outstanding at 11.44% - pay €354.72pm – just completed first year of 5 year loan
Loan from friend - €910 outstanding – currently paying back €200pm
Car Loan - €11,501 – first payment due 18/01/2010

Do you pay off your full credit card balance each month? No
If not, what is the balance on your credit card? €1178.7 of €1250 limit and usually aim to pay €50-100 pm

Savings and investments: none – have kept up my €150 savings a month from my SSIA but usually withdraw at the end of the month for bills – have managed to save €300 over last two months

Do you have a pension scheme? yes

Do you own any investment or other property? no

Ages of children: none

Life insurance: 85.75 per month – so high as my Dad is guarantor on the mortgage so I pay life assurance for both of us.

Other outgoings:
ESB – approx €110 every 2 months
Mobile – approx €60pm
NTL & Broadband - €122 every 2 months
Petrol - €90 p.m
Groceries – Lidl & Tesco – approx €300pm

Annual outgoings:
House Insurance - €181.14 p.a.
Management Fee - €971 p.a.
TV Licence - €160
Car Tax - €302
Car Insurance - €357

What specific question do you have or what issues are of concern to you?
Am really trying to identify the best way to clear my loans/credit card and not sure if debt consolidation is the way to go – with my loan and credit card debt over €27k, perhaps a low interest loan might be best. I can’t clear my overdraft which reaches its limit of €2000 every month and am just sick of being in debt – I’m on a good salary so should be in a better position. I currently go out about twice a month so not going crazy, bring my lunch to work, buy coffee once or twice a week. Any advice would be welcome.

Personal loan rate look v.high? What was that for? i.e. Did you buy some asset(s) with it that you could sell?
Also, did you just buy a new car !? In your financial situation!

I'd be surprised if a 1 bed fetches more than €1000 per month (if that in the current market). The OP would still be liable for the mortgage of €824 (unless they could switch to interest only), would no longer be entitled to TRS and would also have to pay their own rent somewhere else. They would have to cover PRTB registration and the management fee. They may also face a stamp duty liabilty.

Even if they wanted to, I don't really think moving out and renting the apartment is a viable option.

Agree that keeping your home should be the top prioirty. Followed by:

- Pay back your friend, don't let money probelms destroy your friendships
- Cut back ruthlessly on Boardband/ESB/Groceries and all discretionary spending
- Sell car for a cheaper version.
- Pay off credit card with cash from car sale.
- Cut credit card in a least 2 pieces
- Pay off car loan
- Negotiate best available rates on personal loan, mortgage, and life assurance.

Don't mean to sound patronising, but you seem to have little hesistation borrowing or getting financial support from friends, family as well as the financial institutions, - this is at the heart of your current troubles.

advice101 said:

Life insurance: 85.75 per month – so high as my Dad is guarantor on the mortgage so I pay life assurance for both of us.

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I still think this might be too high. Are you sure that you're not paying someone's commission on this? I recommend http://www.labrokers.ie as somewhere to look for a cheaper mortgage protection (as a satisfied customer).

advice101 said:

ESB – approx €110 every 2 months

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Switch to Airtricity, up to 10% saving.

advice101 said:

Mobile – approx €60pm

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Lots of room for savings here, I'd imagine.

advice101 said:

NTL & Broadband - €122 every 2 months

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Seems extremely high. I pay ~€45 a month for landline rental + 4mb broadband from Smart Telecom. Ditch cable TV, you can watch plenty of TV/movies on a decent broadband connection like this.

advice101 said:

Groceries – Lidl & Tesco – approx €300pm

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Also seems quite high. I shop only in Lidl and spend €100 per month (single)

advice101 said:

House Insurance - €181.14 p.a.

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Is it an apartment? Seems high for contents-only insurance. Shop around and increase your excess.

advice101 said:

TV Licence - €160

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Might sound extreme, but once you ditch cable, you'll find precious little to watch on this.

Thanks for replies so far. Don't think that moving out is an option - live quite far out in the suburbs of Dublin and apartments are taking months to rent - apartments same as mine had been getting €900pm but are now on web for €850 and still sitting empty. Not near public transport so that doesn't help.

I currently work 10-11 hours a day so evening job is out during week. Personal loan was accumulated over last 4 years as I put myself through College in order to get job I'm currently in. Had been earning in region of €30k and then when salary increased went a bit mad , bought car - hindsight is a great thing! Once I make concerted effort to take control now though, it has to be better than getting myself deeper into debt.

Re life assurance - mortgage broker said I had to go with a couple of their companies so I just chose the cheapest. If it is possible to change, I will definitely look into it.

have an apartment so will take advice re ESB, house-contents insurance and will get rid of NTL and get a cheaper broadband package thanks - just got used to paying the bills, never really watch tv.

have cut up credit card. spoke to Halifax yesterday and they could consolidate current debt now (€15.5k) with 7.5% - would reduce personal loan repayments by about €20pm and clear credit card and pay back my friend. selling car for cheaper version would then clear car loan due in january.

Groceries - was an average over last three months from excel spreadsheet I keep on what I spend which included spending over christmas (cds for presents, christmas dinner etc) - should have excluded those when I tallied it.

Any other ideas more than welcome. Thanks again.

Just looking at your figures and, by my reckoning, you should have about €700 per month to play around with.

Income: €2900 pm
Mortgage - 825pm
Loans - 550pm
Annual bills - approx 175pm
Other Monthly expenditure - 650pm

So incomings are 2900 but outgoings (excl car loan) are 2200. That's the cushion you want to squeeze and see where the savings are (after following through on the suggestions above).

The good news is that the friend's loan will be paid off within 4/5 months so that leaves you with that 200pm extra.

I may have missed something in the line items you mentioned but it does look like you need to scrutinise where that extra 700-odd is going every month. Two months saving that and your credit card bill could be paid off!

Sprite

advice101 said:

Re life assurance - mortgage broker said I had to go with a couple of their companies so I just chose the cheapest. If it is possible to change, I will definitely look into it.

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What type of life assurance is it? Basic mortgage protection or something extra?

advice101 said:

have cut up credit card. spoke to Halifax yesterday and they could consolidate current debt now (€15.5k) with 7.5% - would reduce personal loan repayments by about €20pm and clear credit card and pay back my friend. selling car for cheaper version would then clear car loan due in january.

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Are Halifax offering to consolidate your credit card debt as well? I don't really think this is a great idea-concentrate on clearing that first-putting it out over 3/4/5 years just increases the cost. Ditto for repaying your friend. Also, will you be able to sell your car at a 'fair' price? Not much is selling at the moment....

Thanks Eblanoid for tip on labrokers.ie - looks like I can save €50 on my house insurance. Will give them a call re my life assurance - it is a mortgage protection policy and it appears from their website that I am entitled to change companies at any point without losing out on what I have already paid.

CCOVICH, halifax said they would consolidate all three but you are right, it's probably a bad idea if it's going to cost more in the long term so I think I will just get them to take over the BoI loan as it will still work out cheaper over the remaining 48months on a lower interest rate. Same car as mine is selling on carbuyersguide.ie for up to 9000 less than what I paid - not sure if it is good financial sense to write off that amount of money. Will work on reducing other debts and maybe revisit in 6 months when I see what I have been able to clear.

Not sure where extra €700 has been going Sprite but you are right - working up a new budget this afternoon, it looks like I could have cleared debt to friend, credit card and have overdraft reduced to 1000 by the end of June. I think the fact that I'm looking at everything in such detail will make me a bit more savvy about my spending going forward.

Thanks again for the help - makes it seem like there is light at the end of the tunnel when you get a few different perspectives.