Paying off a DMP quickly

GlasweJen

I have a friend who is horrendous with money. About 3 years ago she came to me because she had taken out another bank loan and could not afford the repayments.

At the time she owed £14000 to 2 bank loans, 2 overdrafts, 3 credit cards, some payday loans and a provident loan. As her debt was almost her yearly income I asked for advice on here and was directed towards CCCS. We called them together and she was put onto a DMP.


Fast forward to now and she is getting better with money though still needs gently steered out of the shops sometimes. She's 30 this year and realises that due to her losing her job she won't be debt free on her plan until 2017 (this is calculated assuming she gets a 35 hour NMW job within the next 6 months). She is worried that she will never be able to meet a guy and have a mortgage with him as it will be 5 years from completing her DMP until her credit rating is back to "not horrendous".

Now today she called and told me her bank are withdrawing her overdraft with £600 to go and when she called the DMP company she only actually owes £6500 or thereabouts.

She has it in her head that if she scrapes together a wee sum of money she can clear the smaller debts one at a time leaving the money in the plan to go towards the higher debts. The example she gave was a credit card with £150 still to pay on it, she thinks if she offers half this the card company will take it and the £5 that goes to the card company now will be split between the 7 remaining accounts. Then if she gets 90 she can pay off an overdraft of £300 and the £5 that goes to this will be split between the 6 remaining debts, and so on until she only has the big bank loan and the payday loan left.

Now when we first called CCCS together I remember her being told she will need to ignore creditors demands for more money as they absolutely have to be treated fairly. I'm worried that she is going to carry out this plan and get kicked off her DMP when she's done so well.

To me she is obviously trying to find a way to get out of the plan sooner but I'm worried she will do more harm than good. Can anyone tell me how I can help her to complete the plan before 2017 without breaking the terms of her agreement? She said she can't just bung extra money onto her monthly payment as this makes the creditors think she can afford it all the time.

Monkeyballs

Hi,

I'm with SC and have cleared down a couple of smaller debts through family help and a couple of low F&F's but your right, this isn't how a DMP should be managed BUT as it is not a formal agreement then there is nothing to stop her chancing her arm with a couple of the smaller creditors but to be honest I don't think she'll be able to get F&F's as low as that anyway because if the debt is low value then those £5's probably aren't that far away from the minimum payment anyway!

I do need to say though, before I took any action I consulted with SC first and kept them completely updated afterwards too - the important thing (as far as I'm concerned) is to be open and honest with them at all times.

What she could however look at is going self managed? This obviously gives you more flexibility with your repayments (as long as the agreed amount is paid on time, anything extra is a bonus).

What she may actually be better of doing is to save those extra bits as an emergency fund and if she saves a grand or so and hasn't dipped into it then maybe look at making an offer on one of the larger debts? If she is making a relatively low repayment to her bigger debts then they may be more receptive to a reasonable F&F...

MB

GlasweJen

I wouldn't trust her to go self managed to be honest. I actually have a reminder in my phone to text her every month on the 1st and make sure she's paid (her credit is so bad she can't even get an account with direct debits)

I would need to ask her how her big loans look, I don't think £1000 would be enough for a F&F but I might be wrong.

Monkeyballs

GlasweJen wrote: »

I wouldn't trust her to go self managed to be honest. I actually have a reminder in my phone to text her every month on the 1st and make sure she's paid (her credit is so bad she can't even get an account with direct debits)

I would need to ask her how her big loans look, I don't think £1000 would be enough for a F&F but I might be wrong.

Really? Which bank is she with? If it's only a DMP has she tried Barclays? I have an account with them and it's a standard current account which allows DD and SO's - just no overdraft.

If she is as bad as you suggest and she has extra money available each month and it's regular (not a bit of overtime every other month for example) then she's probably better to just increase her monthly payments and stick with the DMP as it stands!

If for example she is paying £500 pcm and she can up it to £550 then she's saving 10% of her DMP off so 5 years would go down to 4.5 years for example

Thinking about it, if you have to remind her every month then I think she needs the time it takes otherwise at the end of it she'll likely be in the same situation within a few years - you might want to consider not reminding her one month to try to hammer the message home (warn her first though)?

MB

GlasweJen

I think that is a good idea to stop the hand holding and not text hew one month. I'm starting to think her motivation for clearing her plan fast is to get credit again and not to move on as she was saying.

When I texted her to find out about the big loan she has went off the idea of paying off bits early already as she can't afford driving lessons, I think she was maybe contemplating car finance after her DMP.

Monkeyballs

GlasweJen wrote: »

I think that is a good idea to stop the hand holding and not text hew one month. I'm starting to think her motivation for clearing her plan fast is to get credit again and not to move on as she was saying.

When I texted her to find out about the big loan she has went off the idea of paying off bits early already as she can't afford driving lessons, I think she was maybe contemplating car finance after her DMP.

Yup, sounds to me like she needs a lesson in self disciple... If she was serious about sorting out her debts then they would take priority over learning to drive (unless it was required for a better job) - learning to drive can wait and as you point out, whats the point of learning to drive if you don't have a car? Hmmm... More debt on the cards me'thinks!

I would say a bit of tough love is in order, I know she is a friend but you're not her mum!

Apologies if I sound harsh but it sounds like you've gone above and beyond what you ought to have to

MB

GlasweJen

She's a friend but we were raised like sisters. I'm the only person she told about this and it all came about because she asked me to lend her money and I asked what she needed it for.

We have spoke and I'm going to wean her off the reminders slowly starting when she gets a job. Looking at her incomings and outgoings she's in no position to even contemplate saving for over payments, she's not even got a safety net of small savings in case of emergency even though this was built into the DMP.

Monkeyballs

GlasweJen wrote: »

She's a friend but we were raised like sisters. I'm the only person she told about this and it all came about because she asked me to lend her money and I asked what she needed it for.

We have spoke and I'm going to wean her off the reminders slowly starting when she gets a job. Looking at her incomings and outgoings she's in no position to even contemplate saving for over payments, she's not even got a safety net of small savings in case of emergency even though this was built into the DMP.

Ah, ok I see... There are people on here who would outright say 'never lend money to family and friends' but that's a little preachy and isn't much help to either of you

That said, I still think a bit of tough love is in order to help her realise that she is a big girl now and needs to stand on her own two feet.

I know it's not going to be easy but while she's panicking then she is likely to make silly mistakes instead of just sitting down and working out a sensible plan or, just accepting that her DMP needs to run it's course there is always the option of a second job to pay her debts off faster...

All that aside, you sound like you have your head screwed on properly so she has that going for her... Maybe you should get her to look at this site and start her own thread? It's great that you're trying to help but having her type up her story and SOA and reading (mostly) impartial replies might be what she needs to get a grip?

MB