DMP or secured loan ?

dawn060861

We have £28,000 worth of debt some credit cards some a lorry loan, we have paid off our mortgage and have been offered a loan of £30,000 secured on our property, which is payable over 7 years,which is £447 plus insurance or we could start a DMP and pay them £590 for 4 years but our credit rating would be trashed, we do not want credit cards etc but would like to move in the next say 8 years so need a good credit rating. If we take out the loan we would be able to pay everyone off staright away so I think that is the best option, am I right? A DMP is the last thing I want but if we had to we weould do it. Mt Husband is self employed and last year had no work for 7 months which is why we are in this mess as we lived off credit cards to make ends meet. he has decent work now and is looking to becoming employed and no longer self emloyed for the company he has a contract with so he will have the security of a wage every month.
I am stuck and do not know which way to go, personaly i think take out the loan ? advice needed asap please , Dawn

Tixy

If you consolidate your debts and secure them on your home then there is always going to be an increased risk of you losing your home.
Can you afford the loan repayments? could you afford them if you lost your income (either lost your job or were unable to work through illhealth) or if husband has no work for 10months of the next year. What if husband cannot find a job for the next year or 2, or finds one and is then made redundant or only finds temporary employment.

Generally because of the risk to the roof over your head turning unsecured debt into secured debt is not generally recommened.

Who have you spoken to regarding a DMP? who recommended it to you? Whilst your credit file would be badly damaged from a DMP this only lasts for a few years. It is possible (but not guaranteed) that by 8year after you started the DMP it would all be clean again. This assumes that your creditors issue default notices in the first 6months (so would disappear within 6year and 6months) and assumes none of your creditors choose to take you to court more than 2years into your DMP (as again a CCJ would only appear for 6years).

What are your current minimum repayments each month? how does that compare to the £590 you are proposing to put into a DMP?
Have you done a full statement of affairs to see if by making a few changes you could manage without a DMP or consolidation loan?

Fortheloveofmoney

Hi Dawn

You will find very few people here will recommend a consolidation loan, especially a secured one as most of us have been there and done that and ended up on more debt as a result.

There is a third option here which is the one I took. I cut my expenditure and concentrated on paying off one debt at a time whilst paying the minimum amount on the others. The rule of thumb is to pay off the debt with the highest interest rate. Once this has gone, move on to the next one etc until it's all gone.

I had a similar amount of debt to you (£30,000) and it took just over 2 years to pay it back. I still had a little bit of a life during that time but cut back dramatically on luxuries, holidays and unnecessary spending.

Have you posted your SOA yet? That's always a good place to start so that the experienced people on here can help you make savings to throw at your debt.

Good luck.

dawn060861

What is a SOA? we had a quote from Palyplan a DMP company that I saw on TV, we were told that we could be debt free in 4 years but could still get CCjs as they do not guarantee the creditors freezing the interestand I have just found out they pay nthing for 3 months so all our bills would go into default, we are on a limited income for 1700 a month and have out goings of 909.93 before we pay any of the debts so we have 590 a month to pay the debts, I am looking for part time work at the monet so we will have a bit more to pay off the debts. we have missed one credit card payment and had 3 direct debits returned and have been charged so we need to move quickly. I am so confused?We are struggling to mke minimum payments now.
Dawn

Tixy

A SOA is a statement of affairs - see this link http://www.makesenseofcards.com/soacalc.html - its recommended people do this and post the results on here to get other people's input and suggestions (eg could you cut down on some costs to allow you to meet your minimum repayments or can you move the debts around to get cheaper APRs without using secured loans). It will also show how far short you are of being able to meet your minimum repayments.

This is a list of the recommended charities to use if you decide to go down the DMP route - https://forums.moneysavingexpert.com/discussion/2077631 In any DMP you are pretty much guaranteed to be given defaults on all your debts.

From the figures you have put £1700 and £909, that would seem to leave £790 a month rather than £590?

If you decide to contact one of the charities you could send use this template http://forums.moneysavingexpert.com/showpost.php?p=21937969&postcount=52 to send to creditors in the meantime and cancel your DDs. This will save you incurring more bank fees for returned costs etc.

If you owe money to the bank your current account is with then you should always open a new account with a bank you don't owe any money to before you send the letter and make sure all your income is going into the new account first.

dawn060861

We have £650 per month to pay creditors and the minimun payments plus the monthy loan repayment come to £916 per month so we are short by £266 per month, if I get a job asap it would be possible but we are struggling now to keep up with minimun payments and have contacted a few creditors but only 2 have accepted lower payments. I am so sorry but what is a SOA ?

Dawn

Tixy

Its a statement of affairs - its basically an income & expedenditure account but also contain details of your assets, debts and the APRs on those debts - so your full financial position - this link http://www.makesenseofcards.com/soacalc.html allows you to create one.

Fortheloveofmoney

If you are short making payments then a DMP with Payplan might be a good option for you. I was in the position where I could afford more than my minimum payments (just) so I was able to play with the figures and avoid a DMP.

Everyone will be able to help more once they see your SOA.

dancingfairy

You could always try a different charity organisation recommended by Martin - for instance CCCS. I am a little confused why Payplan don't pay anything tothe creditors for the first 3 months - do make sure it's the charity organisation people you talk to and not other companies with a similar name who may not be giving you the best advice and may also be lining their own pockets.
df

Numpty_Monkey

dawn060861 wrote: »

What is a SOA? we had a quote from Palyplan a DMP company that I saw on TV, we were told that we could be debt free in 4 years but could still get CCjs as they do not guarantee the creditors freezing the interestand I have just found out they pay nthing for 3 months so all our bills would go into default, we are on a limited income for 1700 a month and have out goings of 909.93 before we pay any of the debts so we have 590 a month to pay the debts, I am looking for part time work at the monet so we will have a bit more to pay off the debts. we have missed one credit card payment and had 3 direct debits returned and have been charged so we need to move quickly. I am so confused?We are struggling to mke minimum payments now.
Dawn

I've heard of , a good few people on here use them, but they don't advertise on TV:think:
Just a little confused about that:cool:
And I find it hard that the PayPlan I know would recomend getting a secured loan:eek:
have a watch of Martins vid, http://www.moneysavingexpert.com/loans/debt-help-plan

Going on a DMP, probably will destroy your credit record for 6 years, but if you get the defaults in early they all fall off at a similar time

Default on a secured loan they possibly can take your home:mad::eek::mad::eek:

Happytogetdebtfree

Hi dawn, all the best with sorting it out, im not sure about the secured loan, is there no chance of you getting an unsecure loan or sell some things or up your hours to make up the short fall ?