A MoneySaver who racked up £180,000 in debt on loans and credit cards has told how she finally became debt-free 12 years later, thanks to the debt charity Stepchange and help from the MoneySavingExpert.com Forum.
Forumite 'Lozzam' says to this day only six of her family and friends know the true scale of the debt she found herself facing - even though the City high-flyer spent more than a decade battling to clear the sum. Finally, just before last Christmas, she was able to post on our Debt-Free Wannabe board with the triumphant title: '£180,000 debt - done!'
Though she wishes to remain anonymous and has asked us not to publish certain details which could identify her, Lozzam agreed to share her story with MSE to help others who find their debt spiralling out of control.
'I thought they wouldn't let me have credit if I couldn't afford it'
When asked to explain how the £180,000 debt accrued, Lozzam, who is in her mid-50s, said: "I don't really know where to start. I had a good job, a good income, I guess over the course of a few years we took out credit cards - we were just living a normal life, it wasn't excessive, it was a good life.
"We're a married couple but only one of us worked, that's me - that's the agreement we had and we were quite comfortable."
The debt, however, began to grow when the couple were living abroad and lost money on their property there. When they moved back to the UK they bought another property to do up - and took out loans and credit cards to help with the costs.
She said: "Things felt a bit tight, but I thought they wouldn't let me have credit if I couldn't afford it. I know looking back that was a ridiculous attitude to take, but at the time it was how I justified it. I always had the feeling I could earn my way out of it, with inflation and salary rises.
"What I should have spotted and thought about was that we were taking on additional debt because we couldn't keep up with the repayments. That should have been spotted much earlier, but I was just optimistic."
In 2003 Lozzam was made redundant from her high-flying corporate job in the City - she prefers not to be more specific about the field she worked in - and at this point the debt really began to spiral, as she kept using credit cards to maintain the same standard of living.
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Turned down for a new credit card
Lozzam said: "I got a new job which wasn't enough to cover the bills. I knew that, but I was desperate. I did manage to change that after six months, but during that period the debt was increasing.
"It got to 2005 and I had been turned down for a new credit card, which I needed to cover costs, and I realised this wasn't sustainable. At this point I was thinking 'I can't pay my bills this month and I don't know what to do'.
"I was trying to manage it myself, I wasn't even talking to my husband about it. There were times when I would lie awake for a couple of hours trying to work out which credit card had space on it, was there anything I could stop doing for a while, was there anything I could delay for a while. I did searches trying to find a credit card I hadn't applied for.
"I phoned my company's helpline and they directed me to StepChange. At that point the debt was £180,000."
How Lozzam cleared the debt - cutting back, bonuses and pay rises
Lozzam decided not to try and have any debt written off, but was grateful the interest was stopped.
She said: "I felt very responsible for it - I had borrowed this much money, this was my problem to deal with. I didn't want to be someone who just had the debt written off. Part of this was I was a homeowner and I wanted to keep my home."
StepChange immediately put Lozzam on a strict budget, and allowed her only to spend on essentials such as food and energy bills. It also told Lozzam to write to about 16 credit card companies and lenders and pay them all an initial payment of £5 each before setting up a new repayment plan. It took about five to six months for the creditors to agree to the new plan.
Some of the immediate and simple savings Lozzam made were:
- Stopping going on holidays abroad
- Stopping going out with friends for dinner, which had usually been a couple of nights a week
- Taking packed lunches instead of buying lunch
- Cutting out buying coffees while at work
- Always using her season ticket and using more public transport, rather than driving
She also used the MSE Forum for help with ideas on cutting back, and remembers seeing other forumites talking about having debts of £60,000 to £70,000 and realising there were other people with large debts too.
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She believes the 'cutting back' was probably harder for her husband, as he volunteered doing charity and theatre work. Together they took the decision he would continue to do this and run the house rather than get a paid job as his skill set would have meant a low salary, and they felt Lozzam having to share the household burdens would add to the stress of the situation.
She said: "I think the original budget was to clear the debt in 14 years, which was a long time."
Lozzam believes the couple managed to stick to it by having a few treats to look forward to, such as going to visit her brother for a few days, going to a friend's for dinner or borrowing a box set to watch for the weekend.
She said: "It took six to seven years before we felt like we were on top of it. In 2010/11 my work bonuses starting coming back, there were salary increases, and that's the point I thought this is becoming manageable and we kept creeping up the amount we were paying to creditors.
"Every year we'd say are we in a position to clear the remainder of the debt off this year, and then say not this year. I cleared a few credit card and loans in 2016 and the last one went in 2017.
"It was such a relief. [By 2017] we were paying off £1,500 a month - so that's a lot of money suddenly to be able to do things. Having that money was a big deal."
'We're never having credit again'
When asked what she would say to anyone else following her experience, Lozzam said: "Just don't do it. If you're going to use a credit card, manage your money and pay it off in full.
"We're never having credit again. We look at things we want to do, and we save up and plan ahead. I just don't want to get into that struggle again.
"Having spent all that time not spending money and being careful with a budget we don't want to go back to buying coffees and buying lunches each week."
And the final line of her forum post, and what Lozzam herself calls "the moral" of her story? "The debt may be huge but the process is the same. One bite of the elephant at a time and it will get eaten."