I'm unsure whether to commit to a DMP?

carlos1973

Firstly, sorry if this is the wrong place but it seemed to be the right one.

I'm considering entering a DMP with Gemstone and was wondering if anyone else has dealings with them and what their experiences are.

A bit of history first. 18 months ago I was stuck with a £2.5k overdraft, 3 times my monthly wage, About £1 k in rent and bill arrears, and £500 on 2 credit cards. I was paying around £200 a month in charges alone. I approached my bank, NatWest and was able to move my OD to a loan of £2.6k over 5 years and have been paying back £78.77 a month since. My 2 cards are with Capital One and Vanquis and are both at their limits. Last year I successfully managed to claim back all of my bank / credit card charges and was able to clear my rent arrears, utility arrears etc with this money.

I've now reviewed last years spending and repayments only to find that I'm pretty much in the same place as I was 12 months ago. Im repaying £109 a month just to tread water and stay where I am. Gemstone have offered a DMP of £135 a month which clear all my debts in 2 years 9 months, as opposed to the 3 years 6 months I am currently facing.

I have numerous DD's that go out on different days, but get paid every four weeks so my pay dates are different each month. The DMP will just mean one payment every 4 weeks, linked to my pay dates.

My new found cautious mind, rather my old spend spend spend one, is shouting it's too good to be true.

Any advice will be greatly appreciated as Gemstone are sending out the paperwork and phoning me back on Monday.

Thanks for reading and sorry about the long post.

funkyfish586

Hi there, im sure someone much more experienced will be on to help you soon but what i have learnt in my short time on here is never use a DMP provider who charges you which by the looks of Gemstone they do?! Payplan & CCCS are free & raved about on here xx

DarkConvict

Here is a post from the other week.

DarkConvict wrote: »

Debt management is a service, buts its not a service you want to pay for, because it means less money is going towards your debts and it takes you longer to pay them off.

Use a free charity, CCCS as you mentioned, National Debtline, CAB, Payplan, CAP, etc.

Pay debt management firms also have a terrible reputation of failing to make payments soon enough, making false statements about defaults, CCJs, credit files court action etc.

Stay away from any pay firms for both reasons above.

Example (over simplified) using http://www.whatsthecost.com/snowball.aspx

£10000 debt at 6% APR.
You make repayments of £200 a month.


Same debt again, but with 15% commission, £200 = £170.

£10000 debt at 6% APR.
You make repayments of £170 a month.


So at 15%, it costs you ~£350 in interest more, keeps you in debt for an extra 12 months, and you pay that £30 commission for 70 months (£2100). Pay firm are a bad idea.


Summary
DMP yourself or free provider (£200)
£10,000 debt paid off in 4.8 years, £1,469.00 in interest
Money paid to provider - £0.
Total cost 11,469.00

Paid DMP provider @ 15% (£200 minus £30 to DMP provider)
£10,000 debt paid off in 5.8 years, £1,805.00 in interest
Money paid to provider - £2100.
Total cost 13,905.00

Do the maths

To work out how long it will take to pay your debts. Put them in the snowball calculator, the 3 debts, min payments and APR rate of each, then he total you have left every month to spend on repaying them.

Numpty_Monkey

Carlos please don't use a fee charging mob
use one of these Non-profit Debt Counsellors' List If you have to go on a DMP,

Post your SOA on here and we'll have a look at see where you can make savings
and other tips

carlos1973

Thank for your replies.
I'm wondering whether to approach the card companies myself, the main problem is the interest is absorbing most of the payments.
I know it may a cheek, but can I ask them to stop the cards and freeze the interest if I offer them £25 a month? That way I can still pay my NW loan and reduce my OD at the same time. I have £200 on one card and £250 on another and a £250 OD. My budget is pretty much spot on and I'm left with £200 a month in disposable income.

char_student

Why not go to CAB? A letter from CAB or other organisation is taken more serioulsy (unfortunately) by crediors than a letter from the client. And then interest and charges may stop

JA1000

3 years is not a long time to pay off debts. Your wages, I am not sure of the hours but they seem very close or below minimum wage based upon average working week 37.5 hours.

If you had an MBNA card and paid the minimum you would be looking at 75 years to pay it all back. Use snowballing calculator and just see what difference £1 extra a month does.

Why screw up your credit file for 6 years to pay off debt just over a year earlier. You need to do an SOA and it will get sorted.