Personal loan or DMP?

gazid

Hi all,

I currently have £9000 on 3 credit cards.
Since I have been in CC debt, I have only been paying off the minimum and not addressing the debt.

I am self employed and whilst things tick along OK, when it comes time to pay my tax bill, I fall deep into my overdraft and start to struggle.

My bank have quoted me 11.9% over 4 years on a personal loan but I'm wondering if a Debt Management Plan organised by the CCCS is the way to go.

Your thoughts are much appreciated.

Regards,

~G

Tixy

Have you spoken to CCCS yet?

If you write out an income & expenditure account (starting with your self-employed income after tax) can you afford to meet the minimum repayments on your debts without reusing credit?

Are you likely to require any additional credit accounts either as part of your business or privately?

gazid

Hi, thanks for responding. Yes, I can do this based on last years figures. I know what my net income is, I just need to factor in business expenses and living expenses, taking into account my tax bill and CC debt.
I guess if my outgoings, including paying minimum repayments are close to or exceed my incomings, then a DMP is the way to go.... But I may also need access to credit in invest in my business too.
It's just all a bit confusing

ILW

A DMP will stop you getting any sensible credit for at least 5 years or so.
Bank will most likely pull your overdraft as well.

gazid

Wow... I wasn't aware of that. My understanding was that a DMP is less serious then an IVA. In any case I will be having a session with a CCCS person on Monday

Tixy

A DMP is less serious than an IVA. But as part of it you agree not to take on any further credit for the duration of your DMP, and you need to include all existing unsecured debts (cards, overdrafts whateever - well not tax bills!).

And your creditors will most likely issue defaults on your agreements which are recorded on your credit file for 6years.

In terms of your income - you need to start an income & expenditure with the figure you earn after all business expenses and tax/ni etc. Then you just show household expenses against household income.

gazid

Thanks for that Tixy-certainly food for thought. I'm working on the expenditure. It sounds as if a DMP is something to do if only really necessary. I didn't realise that once you go into the programme that your debt is recorded as a default.

chalkie99

There are a couple of lines which stand out for me:

gazid wrote: »

I am self employed and whilst things tick along OK, when it comes time to pay my tax bill, I fall deep into my overdraft and start to struggle.
~G

Things aren't really "ticking along OK" if you are not putting away your tax money as you earn it. You need to estimate what you owe as you go along and put it in a separate account so you don't touch it.

If you don't do this you are just spending money that isn't really yours and not understanding clearly what income you are actually making.

gazid wrote: »

based on last years figures. I know what my net income is, I just need to factor in business expenses and living expenses, taking into account my tax bill and CC debt.

................


It's just all a bit confusing

Your net income is what you have left after your business expenses. It is perhaps why you find it "all a bit confusing".

There is no point in saying you know what your net income is and then saying you just need to factor in your business expenses.

Work out how much you are left with after all business expenses and tax and consider whether you actually have a viable business and whether you need to increase your prices to survive.

Simply put, if you are falling into debt to pay your tax bill you are living beyond what you are earning.