Can't bring up to date, but maybe minimum payment

Michaelhorton106

Hi folks

So a little introduction, I owe around £30k on credit cards and loans, own my own home (worth around 280k-300k, mortgage of 90k and second charge of 60k for previous debt - I've made a lot of mistakes!).

Since January I haven't been able to make minimum payments towards my cards, and had hoped to increase the amount of my secured loan to cover the extra (I know you shouldn't borrow to get out of it, but 30k on a DMP is just never going to clear, so I felt this the best option short term). Trouble is, my credit rating is bad as my cards show in arrangement or overdue so no-one wants to offer me the additional money against my properly, despite the substantial equity in it.

My salary is around £34k p/annum (in sales, so it fluctuates), I'm getting help from my girlfriend every month and will soon have finished paying off a couple of payday loans which will free up some money.

I've spoken to my mortgage advisor, who said with good credit payments I could get a decent credit score in a year and then potentially remortgage (as opposed to increasing the second charge) thus cutting down on my monthly payments hugely and even obliterating the £650 per month second charge. Trouble is, I don't have the money to pay the overdue balances on the cards to bring them up to date, to then continue with paying minimums for 12 months to get where I need to be. Does anyone have experience with this, if I contact the creditors will they be happy to show me up to date on the credit score if I'm paying the amount they ask for monthly?

Thanks!

sourcrates

Hi,
Wow, your scaring me with your logic, borrow (again) your way out of debt ?

Didn't work well the first time did it ?

Seriously, sell the house, clear your debts, start again.
You should walk away with around 150k, enough for another house surely ?

Man I'm not been funny, but your a disaster waiting to happen if you consolidate again !!!

Michaelhorton106

Thanks for coming back to me so fast, I really appreciate the feedback

It's certainly crossed my mind, but due to sentimental value (history, which I won't go into here) I wouldn't want to move on yet.

I certainly see your point, and I can only assure myself it won't be happening again. Stupidly kept all cards after the last consolidation, but the past few months have been horrible and its pushed me to realise I would never want to be here again.

Any experience with bringing payments up to date as mentioned?

sourcrates

Michaelhorton106 wrote: »

Any experience with bringing payments up to date as mentioned?

So you can pay the minimums, but not the arrears, unfortunatly you have nothing to bargain with, your credit file will show "in arrears" for however many months worth of arrears you have, even paying the normal minimum payments will not change this.

I think you need to slow down, and take a long hard look at how you got into this situation, your credit will be screwed until your up to date with your payments, even after this your file will still show the "AP" markers for six years, maybe longer, depending on how long you take to shift the arrears.

It's catch 22 right now, could be you need a new plan to tackle this, my suggestion ?

Contact National Debtline for advice, you can't borrow, and you can't afford to service your debts, you need another solution otherwise your just going to get deeper and deeper into the mire.

Annisele

Michaelhorton106 wrote: »

I know you shouldn't borrow to get out of it, but 30k on a DMP is just never going to clear, so I felt this the best option short term.

I don't think a short term solution is going to work. I know you're planning on sorting a long term solution in a few months, but on the income figures you've given I think it'll be a real struggle.

Your total debt (including the unsecured) looks to be somewhere around the £180k mark - a little over five times your salary. Put together with the missed payments and the payday loans, that's not attractive to a lender.

You may find that you've no choice but to sacrifice your credit rating. Credit card companies are required to report the truth to the credit reference agencies. That means that if you come to an arrangement whereby you pay less than the minimum, they will report that an arrangement is in place. That may not be a terrible thing; plenty of people on these boards will tell you they think they made a mistake when they consolidated their debt.

Would you be willing to post a statement of affairs up here? People might be able to make helpful suggestions if so.

Michaelhorton106

Thank you both for your very quick, concise responses. It's great to speak to people with a lot of experience about this.

Sourcrates- I have been in contact with StepChange previously about this. Having gone through all of their processes, the answer they gave was effectively a DMP. When I mentioned how long it would take to clear (at the time, working it out to leave around £100 to pay off all creditors) their answer was "yes, but your circumstances may change". That's a fair point, and I respect StepChange for the work they do, button that same point - they may not change, and staring down the possibility of 25 years to pay it off is (I believe) unrealistic, and frustrating when I have available equity in my property. You may be right that I need to sell eventually, my concern would be how would I get another mortgage if my file is affected for 6 years?

Annisele - I should mention my intention when remortgaging would be to bring my girlfriend into the equation too as joint owner, whose salary is atound £30k also. In terms of household affordability, the cost of a £190k mortgage (which would consolidate all outstanding) would be pretty easy, especially given that I pay over £1009 to my mortgage and second charge combined at the moment.

Annisele

I suppose it depends on how willing your girlfriend is to throw her financial lot in with yours.

The fact she's been helping you out every month suggests she's willing to shoulder some of the burden. But you've been unable to meeting the minimum payment despite her help - which suggests she's either unable or unwilling to give/lend you the amounts you need.

You might have a relationship issue more than a money one. If you live together and share finances already, I'd take it as a red flag that you can't jointly afford the minimum payments. If you don't live together, and/or you don't share finances, I'd be extremely wary about merging finances in order to sort out your debts.

patman99

The one thing that happened with all the credit cards I had when I started my DMP was that the providers stopped adding interest.

This means that what you pay will be the core amount. This makes it easier to see the end-point.

You can also manage your DMP online and make extra payments as and when your financial curcumstances change.

Your salary might be £34k now, but in 2 years you might be in a different job and earning a much higher salary. So your debts will get paid-off quicker.

runforlife

Post a statement of affairs as has been previously suggested. Then wise people with experience of this situation will be able to offer reasoned help. To be honest a DMP for £30K debts with a salary of £34K is a pretty good and achievable solution. Our debt was over £50K by the time we had added it ALL up. That's another thing. Make sure you include everything! And as from today CUT up your credit (debt) cards.
http://www.stoozing.com/calculator/soa.php

Michaelhorton106

Annisele - Sorry I should have made it clear. We don't share finances (in as much as we have separate bank accounts), but she moved in last year and is paying me money towards the bills each month. It's not money meant for helping me out with my finances, more paying an amount towards the share of the monthly bills.

Patman - You're right it may change. This brings me onto an interesting query - I work in IT sales, so my income fluctuates each month somewhere between £1800 and £2200 per month (sometimes slightly over, doesn't tend to be under £1800 though). How does a DMP take into consideration commission payments? As the only money i have guaranteed to be paid each month is £1300 basic salary. This of course does mean that pulling my finger out and working harder will directly get this paid off quicker (which is exactly my intention). That's very pleasing to know I can vie it online and make manual, additional payments too though. I assumed it would be a set figure each month with a guaranteed end date, but if I'm able to make ad-hoc payments towards it whenever I can that makes me feel better.

runforlife - I certainly will post the SOA, although if you can tell me what to put down for monthly income after tax (considering i'm in a fluctuating sales position as mentioned) that would be very much appreciated. As for cutting up the cards, I think you may be right there. It's not something i've done yet, not because i intend to use them again in any way but just to have the details to hand easier.

Thank you all again for your assistance

bennyhill_2

Whenever I've been in a DMP, and liaising directly with DCA's they've only been interested in the true monthly take home pay, ie: the basic. This may be because my commission only represents 10 to 20% of income, but your figure is way higher.

I think they might raise their eyebrows if your SOA indicates that you are in negative figures every month based on your standard income - but you could find ways around this (pm me if you like and I'll elaborate - and I'm not saying it's ethically or marally the right thing to do, just that it may serve as a means to an ends on this occasion).