Saying No to a DMP?

IsoChick

OK, we have approx £30k of joint debt (1 x loan, 7 x CC). We both work full time in well paid jobs, with potential for payrises and bonuses in at least one of those jobs. We are paying min payments on everything, no arrears, no defaults, no CCJs etc. No further spending on any CC. Credit rating is rubbish though.

Run a tight budget for food, other spending, utilities etc (for the last 4 years). Not a lot of spare money after everything is paid though.

We have recently seen an FA (who helped us get our mortgage 5 years ago) who suggested that we look into an IVA or DMP. I spoke to someone from a company he recommended, who said they could set us up with a DMP (an IVA is too much for us).

However, after speaking with him, I'm not sure that we'd be any better off under a DMP. There are several reasons for this....

Our loan finishes in 12 months, this will free up approx £480 per month, which we intend to put straight into paying off the CC debt (on top of the minimim payments). We've been paying the loan off for 4 years, and I really would like to complete this without going into default through a DMP.

In January, my OH's company car goes back and we get a car allowance from his work to lease/HP a car with. We have managed to get a credit line already with a company for this, and nee to just find a car now. If we went into default, I don't know how this would affect the car lease/HP, as if it got cancelled we'd be in trouble.

I really, really, don't want to change bank accounts. We've been with the same back for 14 years, and have never had any issues with them. They've been great with us (and we have a free overdraft which we sometimes use) and I don't see the need to change.

I also don't like the idea of putting ourselves directly into default, when we've worked so hard to keep payments going and are managing them.

When I said the above to the DMP guy, he didn't seem to see where I was coming from. I'm not sure whether I'm being short sighted, but I really think once our loan has gone, and we can put almost £500 a month extra to paying off the remaining debt, we can substantially pay large amounts of cash off our CC debt. I worked out that I could probably pay off 2 of the credit cards in the first year of doing this.

Am I being silly not going for a DMP??

MessyMare

If you can make the min payments and will soon have a large amount of money freed up per month, not really silly- seems you'd be best off snowballing your debts at http://www.whatsthecost.com/snowball.aspx ...might be a long slog but you'll get there if you carry on keeping a tight ship

Norfolk_Jim

Its not the DMP thats the issue - its WHO's offering it that matters. Try speaking to one of the free debt charities like CCCS, they have nothing to gain from you and would run your DMP without charge.
Private DMP providers have a fat commission to gain from you going on a DMP with them. I would suggest its possible that you are being adviced to go on a DMP in orde to obtain fees from a private DMP company - Dont do it - If a DMP is right for you theres no need to pay fees, you can do it yourself or get help from a charity. Consulting CCCS will cost you nothing although there may be a little wait for a telephone consultation

RAS

IsoChick wrote: »

We have recently seen an FA (who helped us get our mortgage 5 years ago) who suggested that we look into an IVA or DMP. I spoke to someone from a company he recommended, who said they could set us up with a DMP (an IVA is too much for us).

What fees would this DMP provider get from you? Usually for debt companies it is 15-20 percent of the money paid by the debtor. And your FA may well get a referers fee.

Please take advice from one of the debt charities who offer the same service at no cost, if you want it.

Given that this appears to be a short-term issue, there may be other ways to tackle it.

Put up and SOA here and we may be able to help out.

mrsb83_2

If you're able to service all your minimums and you're likely to have more disposable income soon, then I think a DMP is unnecessary.

Why is your credit rating rubbish if you're making all payments?

IsoChick

mrsb83 wrote: »

If you're able to service all your minimums and you're likely to have more disposable income soon, then I think a DMP is unnecessary.

Why is your credit rating rubbish if you're making all payments?

As far as I know, it's cos we're maxed out on what the banks etc would give us. All the cards are maxed out, and several have been closed by the bank (with a lovely polite letter saying that we're too high risk for them to keep the card open).

I guess as we're only paying min payments, the actual level of debt isn't reducing?

pudding06

I'm afraid I agree with RAS. I think its not necessary for you to have a DMP but that the FA has a vested interest in referring you! One should always only go to a free ( and I mean totally free) service even if you do need one, but you dont sound as if you do need one, at least as things stand right now. I would try to carry on as you are now, as you seem to have it planned out, but if things get to tight, get in touch with CCCS or one of those recommended on here for advice. Your case sounds really hopeful, good for you for getting things under control when you did. Good luck

RAS

IsoChick wrote: »

As far as I know, it's cos we're maxed out on what the banks etc would give us. All the cards are maxed out, and several have been closed by the bank (with a lovely polite letter saying that we're too high risk for them to keep the card open).

I guess as we're only paying min payments, the actual level of debt isn't reducing?

In which case do an SOA on here and we may be able to help you get over the next year http://www.makesenseofcards.com/soacalc.html. After that, you will be able to start getting the debt down.

Stabilise first, then start to reduce.

With respect to being on the maximums you either need to build up a small contingency budget (this is NOT savings but money to pay for car repairs etc) soemwhere none of your exisitng providers can access or to paydown something on one of the cards that still works, so you have some spare capacity for emergencies.

Be aware that banks are allowed to off-set savings against debt, so you do need an ISA or other account with someone new if you set up a contingency budget.

There are also things you can do to make one hit to find the money for this. What do you no longer use; sell on e-bay, amazon or at a car boot sale. And explore a store cupboard challenge on the Money Saving Old Style forum.

RAS

pudding06 wrote: »

I'm afraid I agree with RAS. I think its not necessary for you to have a DMP but that the FA has a vested interest in referring you! One should always only go to a free ( and I mean totally free) service even if you do need one, but you dont sound as if you do need one, at least as things stand right now.

I am not sure; if the OP's accounts are maxxed out and being closed, then it is responsible of the FA to point out that they need to make some big changes in their financial affairs or they will come very unstuck sooner rather than later.

But they should have been referred to the debt charities, not just a private provider.

On the face of it, it appears that once this year is over they can tackle the debt, but they may need to make changes in their lifestyle for that to really happen.