About to enter into a DMP...a few questions

wishiwasnthere

Hi Everyone.

After doing a lot of reading of various threads on these forums, my wife and I are about to enter into a DMP as we are constantly struggling to make ends meet. We're regularly reaching the middle of the month with zero money because of bills/debt repayments and just can't do it any longer.

We have spoken to Step Change and they have recommended a token payment plan but I have a few questions.

1. If we go through the token payment plan with Step Change, I have read that all of the affected accounts will immediately default. Will these then show as Defaults on our credit reports?

2. Will the accounts continue to be updated every month, therefore, preventing them from dropping off credit files at the 6 month period?

3. In future, if we apply for a mortgage, will we have to declare the fact that we've been on a DMP?

4. Is there any point in trying to come to agreements with the creditors myself before entering the DMP? Would doing this prevent getting defaults?

Thanks in advance

Puzzcat

Hi,


When you fail to make the contractural minimum payment on any account you will default. As for when the creditor actually defaults you on your credit file this is a mystery. Most of us on dmp's want this done asap so the 6 years until it falls off ties in with the length ish of the dmp but unfortunately some will just mark your file arrangement to pay which doesn't fall off until 6 years from settled.


Pop over to the dmp mutual support thread where all us dmp'ers hang out..! lots of information and people to help!


Even if you come to an agreement, I assume you mean doing a self managed dmp the creditors will still mark your file accordingly. Also for a mortgage when you apply they presumably will do a credit check so no hiding there! i think others who have come to the end of a fixed period have stayed with the provider but don't get the best rates.


Puzz. x

Puzzcat

https://forums.moneysavingexpert.com/discussion/4988866

wishiwasnthere

Puzzcat wrote: »

Hi,


When you fail to make the contractural minimum payment on any account you will default. As for when the creditor actually defaults you on your credit file this is a mystery. Most of us on dmp's want this done asap so the 6 years until it falls off ties in with the length ish of the dmp but unfortunately some will just mark your file arrangement to pay which doesn't fall off until 6 years from settled.


Pop over to the dmp mutual support thread where all us dmp'ers hang out..! lots of information and people to help!


Even if you come to an agreement, I assume you mean doing a self managed dmp the creditors will still mark your file accordingly. Also for a mortgage when you apply they presumably will do a credit check so no hiding there! i think others who have come to the end of a fixed period have stayed with the provider but don't get the best rates.


Puzz. x

Thanks for your reply Puzz.

You're right that I would prefer the companies to mark the account as defaulted straight away as this would 'limit' the negative impact to 6 years or so.

With regards to the mortgage, we have about 15 months left of our fixed period. If we were to stay with the same lender, do they usually credit check again? I was under the impression that they wouldn't.

I was also meaning that if we were to apply for a mortgage after everything negative is off the credit reports, do lenders ask if you've ever been in a DMP or is it just Bankruptcy/IVA's they ask about?

Puzzcat

wishiwasnthere wrote: »

Thanks for your reply Puzz.

You're right that I would prefer the companies to mark the account as defaulted straight away as this would 'limit' the negative impact to 6 years or so.

With regards to the mortgage, we have about 15 months left of our fixed period. If we were to stay with the same lender, do they usually credit check again? I was under the impression that they wouldn't.

I was also meaning that if we were to apply for a mortgage after everything negative is off the credit reports, do lenders ask if you've ever been in a DMP or is it just Bankruptcy/IVA's they ask about?

Not sure is my answer i'm afraid as I fixed my mortgage before going into the dmp, post that question over on the other board someone may have the answer for you.
Puzz. x

theerroll

Hi. If you want to renew your mortgage in order to get a new fixed term then yes they will run a credit check. However if you stay with your current provider then the mortgage will continue to run as a variable rate until you have paid back the loan and no credit check will be run. I am no expert but I think you can safely assume that for the year or 2 you shouldn't worry about the rate of interest on a variable as interest rate remain very low and plans to rise them are set out as very small incremental increases. You may have to stick with your current mortgage for the forseeable future. I may well be wrong but this is what I believe to be true. Good luck with the DMP.

theerroll

Having said that... I obviously have no idea how long you have your current mortgage, but if you are borrowing a significantly small amount compared to the Value of the home then that could work in your favour.

wishiwasnthere

theerroll wrote: »

Hi. If you want to renew your mortgage in order to get a new fixed term then yes they will run a credit check. However if you stay with your current provider then the mortgage will continue to run as a variable rate until you have paid back the loan and no credit check will be run. I am no expert but I think you can safely assume that for the year or 2 you shouldn't worry about the rate of interest on a variable as interest rate remain very low and plans to rise them are set out as very small incremental increases. You may have to stick with your current mortgage for the forseeable future. I may well be wrong but this is what I believe to be true. Good luck with the DMP.

theerroll wrote: »

Having said that... I obviously have no idea how long you have your current mortgage, but if you are borrowing a significantly small amount compared to the Value of the home then that could work in your favour.

Thanks for your replies. Following Puzzcats replies, I posted on the mortgage board and someone on there said that Halifax won't do a new credit check if I do the application online which is really good news.

I'm not overly concerned about going on to the SVR, however, we currently pay £611 but if we go onto the SVR, our monthly payments would increase to £705, so it would cost us nearly £100 extra per month.

As a comparison, if we moved on to their current 2 year deal, our payment would only increase by £16 per month and on their current 4 year deal, our payment would increase by £83 per month.

Puzzcat

The other thought, although it slows down repayment is if the monthly mortgage amount goes up then you can adjust your payment to your dmp to reflect this. Not ideal but an option.

wishiwasnthere

Puzzcat wrote: »

The other thought, although it slows down repayment is if the monthly mortgage amount goes up then you can adjust your payment to your dmp to reflect this. Not ideal but an option.

Stepchange have suggested a token payment plan of £1 per month to each creditor at the moment so if things are still the same, this won't be an option unfortunately.

Mort

wishiwasnthere wrote: »

With regards to the mortgage, we have about 15 months left of our fixed period. If we were to stay with the same lender, do they usually credit check again? I was under the impression that they wouldn't.

Several years back while in our DMP we were able to take out a new fixed rate mortgage with our lender. We told the advisor about the DMP, he described the process as changing product and there was no credit check.