DMP or hang on in there?

Cheshire_Cat

hi

1st time poster looking for good advice.

Will put as much detail as possible (hopefully not too much for you!)

we've always lived right on our limits (and often beyond) with money but with having our 2nd child and reality is kicking in. We now need to pay 2 lots of childcare fees alongside loans and overdrafts etc - its just not becoming feasible.

we are wasting loads of money on interest charges on our overdrafts and have 3 loans (one HP) which have between 2 and 4 years to finish.

I know in 2 years our nursery fees will half (when our eldest starts school) and a large loan will have finished. BUT - what do i do before then because i cant service all bills in the meantime.

DMP seems right but worried about credit rating for the future and also feel embarassed/failure for needing this route.

Below is my SOA

Cheers

Monthly Incomings:

My salary - £2,600
Partners salary - £1300
Child Benefit - £120

Total - £4,020

Monthly Outgoings:

Mortgage/Rent - £1077
Council Tax - £143
Gas - £69
Electric - £53
TV License - £11.75
Sky £30.50 (inc phone rental)
Mobile Phones - £35
Food - £400
Car Insurance - £60
Petrol - £260
Life Insurance £15
Gym/Sports £50
Water £55
Buildings/Contents Insurance £22
Union Subs £25
Childcare £840
Children £50
Petty cash £50
Ground rent £25
Car Tax/Maintenance £50

Total: £3,315

Leaves around £700 to pay debts detailed below.

Obviously the above doesnt include things such as birthdyas, xmas, saving for holiday, any other living expenses such as hair, dentist, days out, clothes etc etc.


Alliance + Leicester Loan – Balance £7,226 (328.62 per month until May 2011)

Bank of Scotland Loan – Balance £5936.07 Length of term 60 months, 43 months to go at £159.74 per month)

HP Bank of Scotland - Balance £6,367.50 (£168.53 a month for 45 months)

Overdraft - £5,300 (limit £6,000) APR 20% (interest about £60 a month plus regular reserve fees of £22)

Overdraft - £1,000 (limit £1,010) APR 20% (interest of about £15 a month

Overdraft - £400 (limit £600) APR 20%

Thanks for taking the time to read!

Cheshire_Cat

thanks for reply

the food, children and petty cash are estimates of what we may spend as it has been significantly higher in recent months/years.
petty cash is something new we are thinking of just to help organise our spending.

unions are fixed rates as they protect us in our jobs

Numpty_Monkey

Hi
believe it or not you didn't put enough info in your SOA details:eek::o
Use this
http://www.makesenseofcards.com/soacalc.html

The things you have missed off your SOA are the things you need to budget for, might be £10 a month for this £20 for that etc, dosen't sound much but you get 3 or 4 of them things in 1 month £100 or gone and you are back in the brown stuff:eek:

The other clever peeps will look at the APRs and stuff and we will try to help:A

gizmo111

More detail is needed -

Cheshire_Cat

ok have done the SOA as advised.

hope this helps

thanks!


Household Information[/b]
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned.................... 2
Monthly Income Details
Monthly income after tax................ 2600
Partners monthly income after tax....... 1300
Benefits................................ 120
Other income............................ 0
Total monthly income.................... 4020
Monthly Expense Details
Mortgage................................ 1077
Secured/HP loan repayments.............. 168
Rent.................................... 0
Management charge (leasehold property).. 25
Council tax............................. 143
Electricity............................. 50
Gas..................................... 60
Oil..................................... 0
Water rates............................. 55
Telephone (land line)................... 0
Mobile phone............................ 25
TV Licence.............................. 11.75
Satellite/Cable TV...................... 35
Internet Services....................... 0
Groceries etc. ......................... 300
Clothing................................ 20
Petrol/diesel........................... 220
Road tax................................ 33
Car Insurance........................... 66
Car maintenance (including MOT)......... 33
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 850
Other child related expenses............ 50
Medical (prescriptions, dentist etc).... 2
Pet insurance/vet bills................. 0
Buildings insurance..................... 22.62
Contents insurance...................... 0
Life assurance ......................... 13.75
Other insurance......................... 0
Presents (birthday, christmas etc)...... 67
Haircuts................................ 20
Entertainment........................... 100
Holiday................................. 166
Emergency fund.......................... 0
(Unnamed monthly expense)............... 0
petty cash.............................. 50
union subs.............................. 25
gym/squash.............................. 50
Total monthly expenses.................. 3738.12

Assets
Cash.................................... 0
House value (Gross)..................... 180000
Shares and bonds........................ 0
Car(s).................................. 13000
Other assets............................ 0
Total Assets............................ 193000

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 167881...(1077).....5.39
Hire Purchase (HP) debt ...... 7667.5...(168)......10.4
Total secured & HP debts...... 175548.5..-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
loan ..........................7733.85...160.......9.85
loan...........................7226.36...329.......6.1
overdraft 1....................5300......60........18
overdraft 3....................400.......6.........18
overdraft 2....................1000......15........18
Total unsecured debts..........21660.21..570.......-

Monthly Budget Summary
Total monthly income.................... 4,020
Expenses (including HP & secured debts). 3,738.12
Available for debt repayments........... 281.88
Monthly UNsecured debt repayments....... 570
Amount short for making debt repayments. -288.12
Personal Balance Sheet Summary
Total assets (things you own)........... 193,000
Total HP & Secured debt................. -175,548.5
Total Unsecured debt.................... -21,660.21
Net Assets.............................. 3,458.79

Cheshire_Cat

any help appreciated guys

gizmo111

Presents (birthday, christmas etc)...... 67
Haircuts................................ 20
Entertainment........................... 100
Holiday................................. 166
Emergency fund.......................... 0
(Unnamed monthly expense)............... 0
petty cash.............................. 50
union subs.............................. 25
gym/squash.............................. 50

Presents, entertainment and holiday can be cut by loads - you need an emergency fund of say £50 per month. What is the petty cash?
You could also reduce your mortgage to interest only for a couple of years to clear all this debt and then use the money saved from debt repayments to overpay the mortgage. How long will the high childcare costs go on for?

Cheshire_Cat

cheers for reply

petty cash covers things i guess that people include in emergency fund - unexpected things we may need or available cash to get a take away or extra food etc

the entertainment is £50 each for me and my wife. for our sanity we need a separate pot of money each so that we wont argue over what we buy/do with our own bit

i agree regards birthdays/xmas but it is amazing when you add up per person it seems about £400 for both xmas and birthdays which is £66 a month.

hol is an ideal amount we want to save. our jobs mean we go in the school hols at the most expensive time. of course if there isnt sufficient funds we dont go.

thought about going interest only but mortgage is up in june 10 and i hope to get a better rate than 5.39%. am also with northern rock so unsure if i could move to interest only between now and then. (just coming off a 6 month payment hol)

the chilcare is pretty much set for next 2 years (may drop by £100 or so when eldest gets some sessions free)

is a dmp wise?
will we suffer in the long term?

thanks

serenity34_2

I'm not going to give detailed feedback on your budget just some general pointers - you would probably benefit from running through it with a debt counsellor at National Debtline on freephone 0808 808 4000. They are an impartial charity and the advisers will not judge you on how the debt accrued, They are there to go through options open to you based on your curcumstances.

On the face of it, to be blunt, you cannot afford the contractual monthly payments for your credit debts. So yes, the budget could be tweaked here \7 there and somethings may change. I still don't see that you can afford the payments. I'm not going to discuss consolidation loans because in most cases they don't work.

Main options will be to 'self negotiate' with creditors using sample letters that organisations such as National Debtline / CAB can provide. Split your surplus income 'pro rata' between your creditors ( biggest debt gets biggest amount and so on ). Send your budget with the letter to all creditors to demonstarte what you will be paying from now on.

That's not for everyone but it is perfectly possible to do yourself although you have to be quite hard-headed about it and not enter into any telephone discussions with creditors as it won't usually get you anywhere.

A free DMP may be the way to go as it's essentially someone doing all the spadework for you. Don't touch any fee charging companies, go with a free provider like CCCS or PayPlan. National Debtline offers a DMP referral service where they will essentially do the application for you and refer to one of these organisatons ( a bit like Post Office check and send for passports! ). They don't charge for this and will be very honst with you about any budget figures that would be seen as unnacceptable for a DMP.

I'm not saying it's definitely not an option but I probably wouldn't look at an IVA in your case as your level of debt isn't that far above the equity you have in your property ( and you will usually be asked to remortgage and pay a chunk of equity into an IVA as well as monthyl payments ).

One other thing - you note that you have a HP agreement for a car - is this definitely HP or was it just a loan/finance to buy the car? ( lots of people get these confused; check the original agreement you signed ). If it is HP and the car's essential then you need to put the payment in as an essential expense as the car can be repossessed if you fall into arrears. If it was just a loan then you owe the money but they cannot take the car even if you don't pay. In that case the loan would go into a DMP as well, for example.

Good luck whatever you decide to do. I appreciate you are concerned about your credit rating but the advantage you have is that unsecured credit debt is much easier to deal with than, say mortgage or secured loan arrears where you stand to lose your home. The simple fact is, if you simply can't meet the monthly payments then whatever route you go down your cred ref file will be affected in some way.

If you have any debt with your current account bank ( loans credit cards or an overdraft ) then I also recommend you look at moving banks as soon as possible as they can take money from your account to repay the debt you have with them even if you are in a DMP or have offered reduced payments yourself. The overdraft is left behind as another credit debt to be treated the same as credit cards etc.

Hope this helps as a starting point

Cheshire_Cat

cheers for taking the time to post those suggestions.

have been offered interest only by northern rock until the end of my deal for £750 a month which would put about £320 back in the 'pot' to service my unsecured debts.

Obviously long term this means having a larger mortgage to pay back and potentially paying for longer.

confused!?!

i know in 4 or so years the outgoings will be so much less its just getting to that point as unscathed as possible!

gizmo111

If you cut back on presents, entertainment sky, gym and add in the savings on mortgage as well as the surplus you have you have around £950 per month to throw at these debts - you will be debt free in around 2 years. No creditor is going to accept your SOA as it is above with all the extras.
You need to shop around for gas elec etc and insurances to get the best deal. Groceries could be cut a bit.
Loads of money saving ideas on Old Style boards - I have cut my expenditure by over £300 per month and the changes are hardly noticeable, although now we are all eating better for a fraction of what we spent before:j