Debt Management Plan

smith10_2

Hi again - I posted for the first time before the weekend and appreciate the advice I was given, both on this site and by spending a fair bit of the weekend on the internet. I also spoke with the CCCS and for the first time to a couple of friends about my debt. I feel better already but there is a long way to go. My question today is I have 5 creditors which include a personal loan and a £700 overdraft. The other 3 are credit cards, all which have given me massive credit limits which I have not reached. I am pretty certain I am going to go down the route of a DMP with the help of the CCCS as feel that I am not strong enough to deal with creditors on my own and have read some very good stories about CCCS (and actually no bad ones). They have advised me it is important to open a new bank account because one of my debts is my overdraft. This worries me as I am sure I am going to get into a pickle as I need to trust that my employers (I have 2) get my salaries paid into the new account in time for the likes of my mortgage/council tax etc etc to be paid. One of my credit cards is doing 0% interest transfer to another bank account (with 3% transfer charge) - would it not make sense that I transfer £700 to my bank and ask them to cancel my overdraft then that would be one worry less? I appreciate your advice - this was something I thought about after speaking with CCCS. The above is whats most important to save my worries but also wondered if was worth transferring also on 0% the balance of one of my cards with the lowest amount on it. Know again would mean there was a transfer fee but that means I would be down to only 3 creditors.

MRS_A_3

So you're saying you've got the money to pay your OD off in one go?

Do you have any other debts with that same bank that would go into your DMP? If not then you wouldn't need to change your account.

If you were to do the 0% transfer then would you actually need to go on a DMP? Would reduced payments be better?

NorthernLas

OP: It is great that you have been in touch with CCCS.

Looking at your other posts you seem like you are beating yourself up and thinking that things will go wrong.

As you have a loan and overdraft, then it would be better to get a basic bank account with someone else. You can always move money on-line to make sure you have enough to cover your bills. Or not move your bills until you are certain that you have sufficient funds.

You have said that CCCS have recommended a DMP, but your credit cards are still offering you balance transfers?? To me this suggests that you have other options than a DMP ... but no-one can advise you until you post a statement of affairs (it doesn't have to be exact - but you must have had some figures to put into CCCS).

I don't mean to question you, but wonder if you are thinking that your situation is worse than it really is, where it could all be sorted out if you got help with budgeting.

Are you up to date with your mortgage and utilities and council tax? Can you cover your minimum payments?

Of course you don't need to post an SOA, but a DMP will wreck your credit rating and why do this if there is another way to sort the problem out?

smith10_2

thank you both for your responses - the problem is I am clearly !!!!!! with money so therefore I feel the only way out is getting help from someone else and that is why to me a dmp seems the best option. I feel I cannot even come up with figures to post a soa as dont even know where my money goes! I am not actually in arrears with anything but do not know how to budget and am funding a rather nice lifestyle with all the credit that is being thrown at me. I early after tax £1555 a month, am up to date with mortgage, council tax and utilities etc. I have remortgaged in the past and prob could do this once more but that is clearly not sorting out my spending issues. I owe £700 in overdraft, have a loan for about £9k, and 3 credit cards totalling around £13500 two of which still have a fair amount of credit left on them. The hope is that the DMP gets the interest stopped but I know this is not a definate but they are saying I have around £560 a month which they can pay to my creditors and with this my debts would be cleared in around 3 years - if I was to just try paying these amounts to my creditors I would be paying for a lifetime (in my opinion?). As mentioned in my previous email - say I was to transfer the balance of the card with £1800 to another card and then passed that card to a friend (who I would trust my life with) - I know it seems like I am not yet fully learning my lesson but say after all this was over and I needed something in an emergency, would I not still have credit available to me?? Sorry, very early days and feel I am doing well but cannot get out of my head yet 'what if i really really really need money for something!' (i don't mean shoes or a holiday) thanks in advance x

NorthernLas

OP:

You should minimise the interest that you pay on your debts. It is recommended in this article http://www.moneysavingexpert.com/loans/debt-help-plan

If you do a DMP you will need a new current account because of setting off rules. Read this article http://www.moneysavingexpert.com/banking/setting-off

A DMP is an informal arrangement, your creditors do not need to freeze interest. As part of agreeing to a DMP, you also agree not to take on additional credit (because the whole point is you cannot pay what you owe already).

In order for this grand plan to work, you need to work out where your money goes. http://www.moneysavingexpert.com/banking/Budget-planning. How hard is it to write down in a notebook ... OK it is dull, but you will know exactly what is happening to the money that you earn.

Simples

DVardysShadow

NorthernLas wrote: »

OP:

... A DMP is an informal arrangement, your creditors do not need to freeze interest. As part of agreeing to a DMP, you also agree not to take on additional credit (because the whole point is you cannot pay what you owe already).

If you did a 0% transfer, knowing you were going to start a DMP, you might have a very p'd orff creditor who might not cooperate.

Oneday77

I agree with all of the above. A DMP probably isn't your solution.

You need to take budgeting on board and work at it, the CCCS is isn't a crutch when you don't make the effort.
www.makesenseofcards.co.uk/soacalc.html gives you somewhere to fill in your SOA. It is broken down into clear headings that you can put in the relevant values. If you don't know these then you need to, otherwise you will end up back to square one. The CCCS must have asked for the same information so you do know it.
All your Credit cards must be destroyed pretty much now. In an absolute emergency you could miss a CC payment rather than add more credit. Anyway with your level of debt I reckon if you tightened your belt a little you would clear things like the OD in notime and free up extra cash each month.

smith10_2

thanks - I pretty much took guidance from the CCCS re what I am spending as really had not kept track before as would just fall on credit cards when required. It will be difficult to stick to but I feel I will knuckle down and follow their spending guidelines which I will gather up and post on here. I would be managing to pretty much closely pay the minimum requirements each month but i feel that the debt would not come down quickly enough due to the interest that is being charged. I know it is not a guarantee that they could get interest stopped but surely there is a possibility of them getting this so my debt would go quicker? If I pay around the minimum each month I wont fall into arrears but will be paying for ever - or is there a way round this?

HappyMJ

smith10 wrote: »

If I pay around the minimum each month I wont fall into arrears but will be paying for ever - or is there a way round this?

Well, a DMP won't help that. A DMP will make you pay most of your excess income to all your creditors for as long as is necessary to clear the debts in full. Freezing interest is NOT guaranteed. You need to cut expenses, increase income and increase payments to CC's.

If you have not used credit limits you need to learn money management to be able to be offered those 0% deals so that are never paying high interest but are also making good progress into paying them off whilst not destroying your credit.

If you were to consistently pay 3% of the balance outstanding today each month for the next 3 years you would be debt free. It takes a lot of will.. i.e you need to want to reduce debt to get them lower. Paying only what they ask as a minimum isn't going to get you anywhere.

smith10_2

thanks - I really feel with living costs I have cut down to the bare minumum guidelines as suggested by CCCS and they have advised I have around £528 a month to pay to creditors, based on what you are saying I would need £662 so not fully meeting their guidelines. I shall give things a go over the next couple of months and see if I can make a difference. Had known it was not guaranteed that interest would be stopped but had thought it would be a possibility. My personal loan does have around 42 months left on it and can't see I can up those payments in order to meet my credit card payments.

Oneday77

Post your SOA.....I know we are all repetitive but it really is the next step towards being debt free.

Where you think you can't cut back any more we may.
The wealth of information on here has paid off many a debt and relieved the stress of many.
I for one have been a benfit of that experience.
Even if you forget something people will provide prompts. £1555 a month is a lot to account for but trust us the help is here