Circumstances improved, how to approach debt now?

MerchantMariner

Hi all,

Long time lurker here. The forums have helped me so much over the past few years, and I like to think they've helped me gain a more responsible, "adult", view of my finances.

To cut a long story short, I started a sponsored training course (company paid Uni fees and modest allowance) over three years ago. I went in with old overdraft, catalogue and card debts and ended up getting myself in a pickle in my first year and going down the Wonga route. I got a DMP set up and have been paying that consistently for a good 1.5-2 years now.

I have now finished the course and my company have offered me continued employment in the role I'm now qualified for. This means a significant increase in my earnings (tax free as I work at sea).

I have constructed what I believe to be a very generous budget (underestimating income and overestimating expenditure) and from January on, I have £1000 per month in "disposable" income.

Budget is below in form of SOA. Please note that this is a year's figures, averaged out to a monthly figure. Some months (when I'm at sea) I spend very little. When I'm at home, spending obviously goes up.

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 1
Number of children in household......... 0
Number of cars owned.................... 1
I live with my partner, but finances are separate.

Monthly Income Details
Monthly income after tax................ 1911
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 1911

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 70
Rent.................................... 436
Including all bills.
Management charge (leasehold property).. 0
Council tax............................. 0
Electricity............................. 0
Gas..................................... 0
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 0
Mobile phone............................ 25
TV Licence.............................. 0
Satellite/Cable TV...................... 0
Internet Services....................... 0
Groceries etc. ......................... 100
Clothing................................ 30
Petrol/diesel........................... 30
Road tax................................ 11
Car Insurance........................... 25
Car maintenance (including MOT)......... 11
Car parking............................. 0
Other travel............................ 20
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 25
Wear glasses.
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 25
Entertainment........................... 100
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 908


Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 3000
Other assets............................ 0
Total Assets............................ 3000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 0........(0)........0
Hire Purchase (HP) debt ...... 890......(70).......0
Total secured & HP debts...... 890.......-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Lloyds Overdraft...............1910.42...0.........0
Aqua Card......................1505.37...0.........0
Vanquis Card...................1256.9....0.........0
Capital One Card...............465.33....0.........0
Wonga..........................635.66....0.........0
Littlewoods ...................691.16....0.........0
Santander Overdraft............745.73....0.........0
Total unsecured debts..........7210.57...0.........-


Monthly Budget Summary
Total monthly income.................... 1,911
Expenses (including HP & secured debts). 908
Available for debt repayments........... 1,003
Monthly UNsecured debt repayments....... 0
Amount left after debt repayments....... 1,003

Personal Balance Sheet Summary
Total assets (things you own)........... 3,000
Total HP & Secured debt................. -890
Total Unsecured debt.................... -7,210.57
Net Assets.............................. -5,100.57

Created using the SOA calculator at stoozing.com.
Reproduced on Moneysavingexpert with permission, using other browser.

I'm not too concerned with picking the budget apart as I'm pretty confident I can live within it. I haven't included my current DMP payments of £61, nor have I accounted for £1000 "extra" cash in my bank account.

So my questions are:

• Should I "go mad" and allocate the £1000 per month to the debt? Or be sensible and put some aside to smooth out any cashflow blips?
• Should I revise my offers or pay off one at a time (DMP is self-administered now)?
• Would it be better to save and offer F&F settlements?
• If I do, is there any way to clean up my credit record a bit? Any chance of removing defaults or is that just a mad dream?

Over the next few years I want to start getting significant savings together for house deposit.

Any help you can offer would be appreciated. I know my situation isn't quite as urgent as others, and my attitude probably a bit on the relaxed side, but hopefully I can get these debts picked off ASAP!

Thanks!

MerchantMariner

Mrs_Cheshire

I would look at adding something to the emergency fund, possibly £100 a month, as you have nothing if your car needed repairs or a white good broke down. Then I would look at the apr's of the debt you've got.
How much are you currently paying on the DMP?
With regards the dmp I don't think the creditors would allow you to pay off one at a time as it's would appear to be favouring one creditor against another. I'm only in the early days of a DMP but this is what I understand from my reading!

happy_bunny_2

Might be easier to stick the cash away then pay off in full once you have the money. Shouldn't take long to save it. Saves rocking the DMP boat...

Depends on the interest still being charged though, as will cost you more.

You are stuck with the defaults. Best you can do is check that the dates are accurate and complain if not. They drop off your file 6 years from default date.

Back_on_budget

If I was in your position, I would put a couple of hundred into an emergency fund, allow yourself a little spending money, and put the rest into another savings account. By the end of 2014, you should have enough to clear all te debts.

I think if you were to submit this new I&E, you will push yourself over the minimum payments on many if the debts, so they will re introduce interest.

With regards to you credit record, there s nothing you can do. If you have defaulted, then that will stay on your record for 6 years. If there are creditors that haven't defaulted, but marked you as late payment or arrangement to pay, then he will also stay on you file for 6 years. I think you best route is to get all the debt cleared as quickly as possible (without leaving yourself short), then push creditors to mark defaults from the start of of you DMP. You can argue at not defaulting you has put you in a worse position than someone who hasn't paid anything towards their debts. The earlier you can get the markers to show on your file the sooner they will fall off.

Once your credit report is up to date, you can then work out when all the markers will have fallen off, and can use hat as a guide to when you should be able to get a mortgage with a good rate. ( defaults will mean you either won't get a mortgage, or will only get one with a very high rate). If you need to wait 6 years, then you can save yourself a good deposit!

MerchantMariner

Thanks for the replies everyone.

I'm currently paying £61 per month between all creditors, and all have frozen interest and charges. I was toying with the idea of just paying one off a month (the small ones), which doesn't give them a chance to start charging interest again. I know it doesn't really go with the principle of the DMP, but to be honest I can't see there being any fall-out.

Ideally I want to get everything paid off in six months, which may mean cutting back on some expenditure, but not hugely. With respect to emergency fund, I'm not hugely concerned as I have a small amount of money invested in a very small part-time business my partner and I run and we've just been reinvesting profits, but we have cash available to take out if needed.

Thanks again all!