- Male, 36 years old, wife and son
- We live in a detached house
- 2 cars
- My own gross income is €4,900 + €800–€2,000 from business operations
Four years ago, I fell into a severe depression. I made some very stupid decisions, and the end result is that I accrued about €40,000 in debt; I don’t even know the exact amount. I’ve been so powerless that I haven’t really cared about anything. For a long time, however, I managed to keep up and get the bills paid. Of course, I had to work a lot. Now the situation is that the money just isn’t there. After August, a repayment holiday begins, meaning the mortgage won’t be paid for a year. What should I do in this situation?
Unemotionally put all monthly expenses on paper and check if there’s anywhere you could easily save. Do the same for your spouse; after all, the household is probably shared, or at least the expenses are. Do they feel “fairly” divided to both parties, and what does that mean to each of you? At best, mapping these out together can be a surprisingly pleasant and interesting project, even if money is a taboo subject for many.
At the same time, of course, clarify the total amount of your loans and their costs, and refine your plan for getting rid of them. It’s worth paying off loans starting from the one with the highest interest rate.
A mortgage is certainly on the cheaper end, so I would prioritize others first. Even that can be a therapeutic project at best—getting the total amount down on paper when you look the situation straight in the eye.
You can invest small amounts on the side out of interest, but mathematically, if you have to pay, say, 10-15% in costs on a loan, it’s more likely that paying off the most expensive loans will leave you with more in your pocket. You need to get the compound interest effect working in your favor.
Refinancing loans and lowering interest rate levels (if possible) is, of course, a winning strategy as well. Even then, you just have to be well-informed about all possible incidental costs. You can shop around for a mortgage and extend the repayment period, too. Clear the most expensive loans first.
These are just some thoughts to mull over. Fortunately, €40,000 is still a manageable amount with that income. Good luck!
First, build up a small buffer so that the next minor surprise doesn’t collapse your finances. Then, use the snowball method to pay off your loans, starting from the smallest. It might not be the most mathematically efficient solution, but it is psychologically effective.
Agreed. List all debts and their details, and start paying them off, beginning with those that have the highest interest rates.
I believe there is also a service called debt counseling (velkaneuvonta) that might be worth considering.
Apparently, there are also consolidation loans (järjestelylaina) available, which are used to pay off debts, and the interest rate should be lower than that of the original loans.
The message doesn’t specify what kind of debts these are or who they are owed to. For example, is it a matter of small installment payments here and there, or larger individual loans, etc.?
The most unpleasant customer for creditors is not the one who misses payment dates, but the one who ignores them without any prior agreement. Many creditors are surprisingly lenient when you open up about your situation honestly and straightforwardly.
Cut your expenses. Contact your creditors, and preferably do it with integrity over the phone first. Honestly disclose your situation and create credible repayment plans. Where possible, clear off the overdue small bills.
Fortunately, your message stating “there is no money” is not accurate; it is clearly just that there isn’t enough to cover your expenses. If you were completely broke and without income, your position in negotiating debt repayment schedules would be entirely different than it is now, where you actually belong to the “upper middle class” and are capable of making a credible plan to handle the situation.
One obvious question, of course, is whether your household needs two cars or if they could be more affordable?
Are both cars necessary?
Do the cars have any value, or is there debt on them?
Could one or both be traded in for something slightly cheaper to free up some cash?
However, I wouldn’t necessarily trade both in for some “thousand-dollar beater,” since I have to shuttle the kid around, and newer cars tend to be safer than old ones.
If your depression is untreated, seek professional help. Antidepressants are not expensive and therapy is recommended. Change begins with actions. Actions change your way of thinking.
You are at an age where your parents or your spouse’s parents might very well still be alive. If they happen to have some extra funds, as is often the case with people at that age, it is worth talking to them openly about the situation. Hiding the issue does not help your mental health. If you are lucky, you might be able to get a loan from them and pay off your expensive debts, which would significantly reduce the burden.
In any case, open up Excel and list all your expenses there. If you use alcohol or tobacco products, cut those expenses to zero first. Prioritize your streaming services and shop around for better deals on all your insurance policies, as well as your phone and internet plans.
If you have multiple loans, each one often carries monthly billing fees in addition to the interest. Consolidating loans can lead to savings, but it requires careful attention. You can shop around for these as well.
Thanks for the answers. The debt consists of many different loans. Aktia, Santander, Norwegian. It hasn’t been long since my income was half of what it is now. I did include the car loan in this. It is about €13,000. We need two cars. My wife’s car is worth €4,000.
I have often come across something like this on the Iltalehti website:
I myself have mostly just shaken my head in disbelief when “affordable” loans have popped up in the headlines, because in my opinion, that debt money is outrageously expensive. But could something like that actually be of help in this case?
In my opinion, the starting point for everything should still be the rapid reduction of the loan principal, even if you start paying off the debt with another loan. This is because consumer credits have absolutely shocking fees.
As long as it’s not some 20% interest rate hell, with that kind of income it’s no big deal to pay off such a relatively small loan amount. Assuming, of course, that your wife pays for her own living expenses, her car, etc.
At best, it could all be paid off in a couple of years, and at the latest, within four years.
In our own household, we did a cost-cutting exercise during the COVID era, and it resulted in savings of well over ten thousand euros annually. About half of that came from getting rid of the car, of course, but as stated above, that exercise is definitely worth doing. You end up with surprisingly large savings just from small everyday choices, and cutting them out doesn’t necessarily impact your actual standard of living at all. Just from the grocery bill, we saved over a hundred euros a month when we started planning our meals in advance and ordering a week’s worth of groceries directly to our home from Prisma; that reduced all impulse buys, and food waste was kept to a minimum.
Having worked in debt collection when I was younger, I can confirm that if there’s even a slight chance that a bill might go unpaid or a credit card balance won’t be settled, call the creditor immediately. It is significantly better for all parties to agree on a due date extension or similar rather than letting the bill go to collections.
If a consolidation loan isn’t an option, it is quite typical that you can negotiate a payment plan with creditors and, for example, just pay the interest on those consumer loans. Then, use the money saved from that to pay down the most expensive loan as aggressively as you can. Fortunately, the total debt is ultimately quite moderate, and it seems nothing irreversible has happened yet.
Now just do a proper assessment of your current situation and come up with a clear plan on how to move forward, and I’m sure you’ll be fine. Good luck!
If you have never taken out a student loan, at least one way to lower those interest costs is to apply for some kind of “fluff degree.” Of course, your own situation affects whether this makes any sense, but if you don’t have a previous higher education background, you might even get in without an entrance exam. The joint application period for the autumn starts in a month, and the interest rate for a student loan at Danske is just the 12-month Euribor.
First of all, it’s positive that you’ve found the energy to start untangling this mess by writing here. What’s essential is: 1. Have you sought treatment for depression? If not, book an appointment with a doctor at your occupational health center or local health station immediately; fortunately, medication often helps after a few weeks. 2. Are you fit for work, currently working, or on sick leave? 3. Have you talked to your spouse, and are your relations in good standing? If you have a line of communication but haven’t been able to talk due to, for example, shame, ask them to sit down at the table at a quiet moment when the child is sleeping, tell them everything honestly, and add that you have started resolving the issue but need their support. You are a family, so this is a shared matter. Have you talked to anyone else? 4. Is your economy shared, is your spouse employed, etc.? 5. Are the debts related to a business, payday loans, gambling, or what? If relations with your spouse have soured (as often happens in these situations if problems haven’t been talked about openly), the most important thing is that you talk to someone you trust—parents, another close relative, or a professional. There are tens of thousands in similar situations, but you are in a good position because you have started to address the issue. Call a service that exists specifically to help with these situations. Financial and debt counseling (Talous- ja velkaneuvonta) helps with everyday financial management, budgeting, and debt matters. You can get in touch via the Legal Aid Agency (Oikeusapu) website or by calling 029 56 60123. Financial counseling center (Talousneuvola): A low-threshold place where you can discuss financial matters without an appointment. Many cities and wellbeing services counties offer this service (e.g., the City of Helsinki). Guarantee Foundation (Takuusäätiö): Helps with debt and money problems nationwide. Offers, among other things, a free Debt Line (Velkalinja) and anonymous chat counseling. It is worth starting the process by gathering information: what debts you have—the positive credit register (positiivinen luottorekisteri) shows your debts. Collect your household’s income, expenses, and debts together and call one of the entities mentioned above. Call every creditor, tell them your situation, and ask if they could refrain from collections while you sort out your situation and a repayment plan. They are happy when you contact them yourself, and the same goes for the bailiff (ulosottomies); things can always be worked out when you are open.
The interest rates on those Norwegian and Santander loans are likely over 15%; arrange for a payment holiday on the larger ones and pay off the smaller ones as soon as possible with extra repayments.
As many have already written here, the first step is to record your “entire financial situation” in Excel together with your spouse. Include both incomes, but of course all expenses as well. At the same time, you should record all different types of credit and their costs.
Next, you should try to look for opportunities in the data to reduce the expense side. Food costs, insurance, subscriptions, and other such contracts offer good opportunities to get your expenses under control. You should also consider “consolidating loans into a single loan” if it is at all possible. This can also save you a significant amount in the actual annual percentage rate.
Finally, once you have whipped your expense side into shape, focus on the income side, which is often more difficult. Sell anything extra you have stored away, and you can also look for extra income by, for example, berry picking.
You should also read about “debt avalanche” (snowballing/avalanche method), which I understand to be a good and most cost-effective tactic for tackling these high-interest credits if it is not actually possible to consolidate the loans through any service.
There is something about this equation I don’t understand. You are relatively young, you have a detached house and two cars. You have ONLY 40k in debt. I can tell you that in Finland, the vast majority of households in your age group have much, much more debt than that. I assume your house isn’t located way out in the boonies.
According to public opinion, your gross income certainly qualifies as “high-earning.” What does your wife earn?
Summa summarum. Your amount of debt for your age group is very minimal, and if you are both in the workforce, it feels strange that you are out of money. In that case, you must be spending money on something unnecessary. I would personally start by quickly paying off any possible payday loans and high-interest debts. Also, open up an Excel sheet to record your income and expenses to see if there is anything in your spending that could be cut.
The post mentioned that there is a history of depression. It wasn’t really clear whether it has been overcome or if it’s still causing trouble. Depression/burnout takes away the will to live, and nothing feels truly meaningful. During such times, it can be very difficult to think about things rationally. The debt burden doesn’t actually sound impossible at all, so I would start by prioritizing getting your health in order, if that hasn’t been done already. Things will get easier when the sun starts shining again.
Personally, I would try to pay off the loan all at once. I definitely wouldn’t be paying 10-20% interest. I would sell my cars and other assets. You can probably get to work by bicycle, or a moped. If that’s not enough, I would sell the house.
