Struggling with debt? Ask a debt adviser a question

aalexandram · 15 November 2017 at 10:40PM

Hi

I am on a Debt Management Plan through Stepchange. I owe approximately £2700 to Shop Direct (Very) and they are going to charge me £450 interest next month for a 'Buy Now Pay Later' purchase.

I currently pay £20 a month through the DMP to them so it will take me at least another 2.5 years to pay off this extra interest.

They say they have frozen the 'account' interest which I didn't realise I was paying...and this is at 50% APR!! Prior to entering the DMP I never paid any interest as I always paid the BNPL payments on time. I was advised today that apparently customers have to pay an account interest on top of the BNPL interest - so 2 lots of interest!!! I can't believe I didn't know this!

Anyway, they said the cannot freeze BNPL interest as they don't have the power to. I am sure someone there can do something! Apparently they can only freeze 'account interest',

Please help - is there a genuine reason as to why BNPL interest cannot be frozen?! They are plunging me further and further into debt and I started the DMP in June at £44k.

Shop Direct advised that Stepchange should have specifically advised that BNPL interest cannot be frozen. Stepchange advised that there could be a possibility of interest not being frozen on any of the accounts, but not specifically in respect of BNPL. I explained that Stepchange are not at fault and that I felt Shop Direct were being awkward because someone there must be able to do something.

All other creditors have frozen interest apart from them.

StepChange_Rachael · 16 November 2017 at 2:32PM

Hi Mindis

Thanks for posting on the forum.

I can understand that you’d want to look at your options with the change in finances coming up.

You’ve mentioned that currently you’re just about managing but that the budget is already tight with the current income and that you’ve already explored your options to try and lower the payments through further borrowing.

It sounds like the payments are going to become unmanageable soon and it’s important that your income is available for your household bills and general living costs as a priority.

Based on this information I’d suggest discussing your options further with a free debt advisory service to find out what options are available for you going forward.

You can explore your options using StepChange’s online tool Debt Remedy.

Thanks
Rachael

Mindis wrote: »

Hello Guys,
At the moment me and my wife are in quite big debt. Including overdrafts, we are at around £25k. We are paying every month and dont miss payments, but at the moment my wife is on the maternity leave with the second child and soon she will stop getting money for the maternity. We have 3 credit cards which 2 of them is with 0% apr and one with almost 20% ( 12500 in dept in this one ). Including all fees we are paying around £650 for the debt. At the end of the month we dont have any spare money to take our kids out or buy anything nice.
Now we are in the closed loop, cant get loan ( some with 3.1% apr )because we dont have spare income. Loan would lower monthly payments and of course we would pay off more of the debt then interest.
Do we have any options?
Regards,
Mindis

Mindis · 16 November 2017 at 2:43PM

Thank you for the advice Rachael.
As I am self employed, website takes me to a different site, businessdebtline.org, can I trust this site?
Regards,
Mindis

StepChange_Rachael · 16 November 2017 at 3:40PM

Hi

Thanks for posting on the forum.

I’m sorry to hear that you’ve had a difficult time with Shop Direct/Very and them not stopping all the interest on your account.

Most creditors will stop interest and charges when you’re in a debt management plan (DMP), as you’ve mentioned the others have, but unfortunately this can’t be guaranteed.

I’d suggest speaking directly with us and the team dealing with your DMP so we can discuss this issue further with you. You can find our contact details here.

I’d also suggest checking within your original contract, information of interest and charges should have been detailed in the paperwork.

If you feel that a company hasn’t given you the right details or you’ve been misled then you can make a formal complaint following their complaints process which should be found on the company’s website.

All the best,
Rachael

aalexandram wrote: »

Hi

I am on a Debt Management Plan through Stepchange. I owe approximately £2700 to Shop Direct (Very) and they are going to charge me £450 interest next month for a 'Buy Now Pay Later' purchase.

I currently pay £20 a month through the DMP to them so it will take me at least another 2.5 years to pay off this extra interest.

They say they have frozen the 'account' interest which I didn't realise I was paying...and this is at 50% APR!! Prior to entering the DMP I never paid any interest as I always paid the BNPL payments on time. I was advised today that apparently customers have to pay an account interest on top of the BNPL interest - so 2 lots of interest!!! I can't believe I didn't know this!

Anyway, they said the cannot freeze BNPL interest as they don't have the power to. I am sure someone there can do something! Apparently they can only freeze 'account interest',

Please help - is there a genuine reason as to why BNPL interest cannot be frozen?! They are plunging me further and further into debt and I started the DMP in June at £44k.

Shop Direct advised that Stepchange should have specifically advised that BNPL interest cannot be frozen. Stepchange advised that there could be a possibility of interest not being frozen on any of the accounts, but not specifically in respect of BNPL. I explained that Stepchange are not at fault and that I felt Shop Direct were being awkward because someone there must be able to do something.

All other creditors have frozen interest apart from them.

StepChange_Rachael · 16 November 2017 at 3:54PM

Hi Mindis

Glad to be able to help.

The Business Debtline are a trusted organisation that offer free and impartial debt advice that’s tailored to business debt and self-employed clients.

Debt advice for self-employed and business debt can be very different and can impact a business.

They’re specially trained to be able to provide this advice and tailor it so clients are fully aware of any impact to their business before going ahead with any advice or recommendations. This is why we now advise self-employed people to speak with them.

They can also include personal debts in with the advice so can deal with both.

Best wishes going forward.

Thanks
Rachael

Mindis wrote: »

Thank you for the advice Rachael.
As I am self employed, website takes me to a different site, businessdebtline.org, can I trust this site?
Regards,
Mindis

Cassox · 18 November 2017 at 3:23PM

Hi

I am looking into setting up a DMP. I have completed the calculator, Though I need to adjust it slightly but I have a couple of questions.

1) I bank with Halifax. I have a loan, mortgage and overdraft with them. If I change bank as advised I lose the benefits of which I pay £15 per month for. Car breakdown cover, Home emergency cover. Mobile phine cover and holiday insurance. To purchase these separately comes to a lot more than the £15.

2) The plan does not allow for Xmas/ birthdays or an emergency fund. If something was to go wrong how would I fund it?

Can you please advise.

Thanks in advance

Jellyworm · 20 November 2017 at 3:55PM

Hi there, Posting this on behalf of my girlfriend so i'll include as much info as I can

Here are the facts as I know them.
My girlfriend has has 4 credit cards in her name. A failed relationship about 2 years 6 months ago caused her to have difficulty repaying them. She stopped paying them at this point however did not contact the companies (she has an incredible history of burying her head in the sand and hoping things just go away, however this is not the topic of the advice i seek).
My girlfriend moved into a new privately rented accommodation and has not received any letters however has had missed calls on her mobile that appear to be from Cabot and/or Lowells
From what we can tell from her credit file, these debts have now been sold to Cabot and Lowells, who have been updating her credit file monthly. As you can imagine her credit score is shocking.
Up to now, there has still been no contact with either Cabot or Lowells but we're in a position where we need to improve her credit score (by anything) as in aprox 3 years we'd like to buy a house. We realize that her credit rating will have a major impact on getting a mortgage. Did a bit of Googling and found that a mortgage might still be obtainable as long as there are no defaults within, say, a 2 year period. If this is true then what we want to do (what i'm trying to get her to do) is start and put an end to these monthly defaults being registered by Cabot and Lowells.
So, I'm hoping one of you more knowledgeable people might be able to offer some guidance. Is this a sound idea to try and stop these defaults and stop more negative marks on her file?
If we put a plan into action straight away if 3 years of clear credit file going to help get a mortgage? (I really hope the answer to this is a simple Yes)
What is the best way to approach these debt buyers? she really doesn't have much spare money after rent and everything else but she does want to actually pay something, however small.
Her debts across 4 cards total about £9,000. After doing an income and outgoings sheet she has about £40 she can afford to pay to them. Are they likely to agree to this?
My first thought was just ring them, set up a plan with what you can afford and that should stop all the negative marks, but after a bit of browsing online there's a lot of advice about writing letters and all sorts. I'm lost.
Our goal is not to avoid the debt, but we do need to improve this credit file and we can't just pay it all off huge chunks at a time.
Would appreciate some advice Thanks

Former_StepChange_Linsi · 20 November 2017 at 3:55PM

Hi

Thanks for getting in touch.

When you say you’ve completed the calculator do you mean our online Debt Remedy tool? If so, our budget has a section for sundries and emergencies. This is where you’d budget for special occasions and emergencies. You can log back into Debt Remedy here to update your budget.

As you have debts with your current bank it means Halifax can use the right of set-off so your income isn’t safe. You can find more information about this on our website.

All of your debts will need to be included in a DMP so it’s likely your account will be closed. If the insurances you have with your Halifax account are essential you can look at purchasing these separately. I’d recommend using a comparison website to ensure you get the best deals and then update your budget accordingly.

Alternatively, you can open up a new account with a bank that offers similar benefits. There isn’t a specific bank I can recommend but there’s an article on the MSE website about the best packaged bank accounts.

I hope this helps,

Linsi

Cassox wrote: »

Hi

I am looking into setting up a DMP. I have completed the calculator, Though I need to adjust it slightly but I have a couple of questions.

1) I bank with Halifax. I have a loan, mortgage and overdraft with them. If I change bank as advised I lose the benefits of which I pay £15 per month for. Car breakdown cover, Home emergency cover. Mobile phine cover and holiday insurance. To purchase these separately comes to a lot more than the £15.

2) The plan does not allow for Xmas/ birthdays or an emergency fund. If something was to go wrong how would I fund it?

Can you please advise.

Thanks in advance

stepha4 · 20 November 2017 at 7:19PM

Hi,

I’ll be as brief as possible whilst adding as much info as I can.

Myself and my husband have 2 children, youngest 8 months (I’m on maternity leave), own our house and he’s in full time employment and I’m part time once I go back.

We have substantial debts and I don’t know which way to go about sorting them out...! I can’t work any more hours as childcare would eradicate most of my wage and there’s no family available that can care for them for free. We don’t get any benefits or free childcare hours as my husband earns £32,000 a year.

I have done a budget planner and it leaves us with £98 cash a month once everything is paid...insurance, tax, mortgage, water, electricity & gas & our debts. We are not behind on any payments at all but am fast realising we soon will be if we don’t sort something ASAP!

We currently pay £985 a month on all our minimum payments and loan

our debt is 40k (not including mortgage)

From the above (knowing very little about options) would anything jump out at you with what we should do? Are we too far gone to sort it?

Thankyou in advance, this feels like a very big muddle which I don’t know how to sort. I am on medication for anxiety and this is having a very negative affect on it.

Thanks again 🙂

StepChange_Allen · 21 November 2017 at 9:49AM

Jellyworm wrote: »

Hi there, Posting this on behalf of my girlfriend so i'll include as much info as I can
Here are the facts as I know them.
My girlfriend has has 4 credit cards in her name. A failed relationship about 2 years 6 months ago caused her to have difficulty repaying them. She stopped paying them at this point however did not contact the companies (she has an incredible history of burying her head in the sand and hoping things just go away, however this is not the topic of the advice i seek).
My girlfriend moved into a new privately rented accommodation and has not received any letters however has had missed calls on her mobile that appear to be from Cabot and/or Lowells
From what we can tell from her credit file, these debts have now been sold to Cabot and Lowells, who have been updating her credit file monthly. As you can imagine her credit score is shocking.
Up to now, there has still been no contact with either Cabot or Lowells but we're in a position where we need to improve her credit score (by anything) as in aprox 3 years we'd like to buy a house. We realize that her credit rating will have a major impact on getting a mortgage. Did a bit of Googling and found that a mortgage might still be obtainable as long as there are no defaults within, say, a 2 year period. If this is true then what we want to do (what i'm trying to get her to do) is start and put an end to these monthly defaults being registered by Cabot and Lowells.
So, I'm hoping one of you more knowledgeable people might be able to offer some guidance. Is this a sound idea to try and stop these defaults and stop more negative marks on her file?
If we put a plan into action straight away if 3 years of clear credit file going to help get a mortgage? (I really hope the answer to this is a simple Yes)
What is the best way to approach these debt buyers? she really doesn't have much spare money after rent and everything else but she does want to actually pay something, however small.
Her debts across 4 cards total about £9,000. After doing an income and outgoings sheet she has about £40 she can afford to pay to them. Are they likely to agree to this?
My first thought was just ring them, set up a plan with what you can afford and that should stop all the negative marks, but after a bit of browsing online there's a lot of advice about writing letters and all sorts. I'm lost.
Our goal is not to avoid the debt, but we do need to improve this credit file and we can't just pay it all off huge chunks at a time.
Would appreciate some advice Thanks

Hi Jellyworm

Thanks for posting.

I understand what you're saying and what the aim is with these debts. Credit files are a little bit complex so it's difficult to give cast iron answers to exactly what affects them. However, I can confirm that once a debt has been defaulted (original agreement broken), that default stays on a person's credit file for 6 years, whether it's been paid off or not. This will have some impact on the credit rating throughout this period.

Whether not having had a recent default helps the credit rating I'm not sure; if there are a number of defaults already on there I wouldn't expect it to improve much until either the debts have dropped off (after the 6 years) or until they've been updated as paid/settled. Different banks might have a slightly different view on the credit worthiness if you apply for a mortgage so I can't say whether you would or wouldn't get a mortgage in 3 years. Banks also look at how much income you have and other things as part of an application.

We can help your partner find a solution to her a debt problems. She can register with us on the phone or online for free. The number to call to go through things with an advisor is 0800 138 1111 or if she'd prefer getting the advice online our Debt Remedy tool can be found here: www.stepchange.org/DebtRemedy

I hope this is useful.

Allen

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