Andrew Salcombe took a job three years ago as a special needs classroom teaching assistant. He is keen to become a fully-fledged primary school teacher, but debts are holding him back. To tackle his borrowing, Andrew cut up all his credit cards last year and now has a personal loan on which he owes a little over £10,000.
At 12.9 per cent a year, it's costly - the monthly repayment of £234 accounts for a quarter of his disposable income of £940 - but Andrew's bank says his credit rating is not good enough for it to offer a better deal.
In addition, Andrew has student loans that he will have to start repaying once his income increases. He'd like to know how to get on top of his debts more quickly while improving his future prospects.
We asked two debt specialists for their help: Stuart Glendinning of Moneysupermarket.com and Frances Walker of the Consumer Credit Counselling Service (CCCS).
case notes: Andrew Salcombe, 27, teaching assistant, Preston, Lancashire
Monthly spending: £500 on rent, council tax, utilities, plus additional expenditure on leisure activities.
Debts: £10,400 outstanding on personal loan with monthly repayment of £234; plus overdraft of £1,330 on Lloyds TSB graduate bank account. No credit card debt.
Property: renting a room in shared accommodation, no plans to buy for now.
Andrew has begun tackling his problems by cutting up the plastic, says Frances Walker. But she warns him to resist temptation to use credit cards again - lenders are bound to go on marketing to him.
At 12.9 per cent, the interest on his loan is about typical for someone denied access to the cheapest rates by their credit history. But Andrew should find out why his rating is bad. Has he defaulted on payments in the past? It is worth Andrew obtaining a copy of his credit record, which costs £2, to check that it is accurate.
Walker also points out that Andrew need not worry about student loans repayments as these will be automatically collected out of his pay packet at source once he earns more than £15,000 per year.
Stuart Glendinning says that while the rate on the loan is high, Andrew has done the right thing by avoiding debt management companies, which would have charged even more. He thinks Andrew is unlikely to find a cheaper deal on the loan if his credit rating is not perfect. Also, applying for too many cheaper alternatives could damage his rating even further if he is repeatedly turned down.
All the same, Glendinning believes the situation is not as bad as Andrew may think. The debt is not secured on a home, he points out, and he is on top of the repayments. If he does have problems keeping up with the repayment schedule in future, he must talk to lenders as soon as possible.
Andrew needs to prepare a proper budget which takes account of both irregular and everyday expenditure, Walker says. The CCCS (0800 138 1111) has a self-help pack and once he has worked out how much he needs to live on it may be possible to find extra money to clear the overdraft on the graduate account. Andrew could also open a basic bank account as this will remove all temptations to go overdrawn in the future.
In time, he should be able to save for holidays and so on but he will still have to pay off the Lloyds loan for the next six years. If he finds he can afford higher monthly repayments, he could ask the bank about repaying the loan more quickly. At the moment, creditors are not obliged to let you do this but new legislation may soon require them to do so.
Walker points out that training bursaries are available for postgraduates who want to train as primary school teachers. More information is available at www.direct.gov. Student loans and maintenance grants are also available.
Once Andrew is fully qualified, his earnings will rise. In time, debt repayments will become less onerous and his disposable income will rise.
For a free financial check-up, write to Wealth Check, 'The Independent', 191 Marsh Wall, London E14 9RS, or e-mail email@example.com