Interest increases

gilmum

I would be really grateful for any help you can offer. I have been in a DMP with CAP for over 2 years. The DMP has not gone well as at this stage two years down the line we are paying more than 26% interest rates on more than 40% of our debt. This is basically because when we entered the plan our biggest out goings were on two ten year loans which only had 2 years left to run. They were costing us nearly £600 a month but actually represented a small proportion (about 10%) of our total debt of £60K. When CAP worked out a budget for us and made offers to the creditors, the repayments offered on the loans went down by £100s but the largest debts which were credit cards were actually being offered more than the minimum amount we were contracted to pay. Because we are paying these 3 big credit card debts more than before the DMP they won't recognise the DMP and have not reduced our interest - in fact while we have been in the DMP Lloyds Credit Card have increased our rate from 21% to 26%. It is so frustrating as the creditors (any very annoyingly CAP also) are saying that they won't recognise we are in financial hardship as we are paying more than the minimum amount - but this is only because other creditors are being paid a lot less.

Are all DMPs calculated this way ? I feel that if CAP were going to allocate the offers like this they should have warned us that interest was unlikely to have been written off. We were managing to pay our debts before the DMP but I was worried about interest rates going up and getting more unmanageable. CAP told us that it was good to enter the plan before we got into real difficulty and because of the size of our debt we should do a DMP. The DMP has been so stressful and 2 years down the line we are still getting demand letters and phone calls from creditors. We would never have done this if we had known after two years we would be still be paying 26% on such a large proportion of the debt. Very little of our debt is at 0% the rest is at 12.9%.

I am wondering if we should try and go it alone or change to another DMP company - or do they all calculate things the same way ?

Thanks

crazy_cat_lady

All the companies calculate in the same way - fair distribution...
But there's nothing to stop you going alone. Sourcrates always has fab advice about doing this - he suggests making token payments until they default you and sell the debt on - then work on payment plans.
I'm sure you'll get some good advice on here.

sourcrates

Only way to "get there attention" is to pay them a £1 a month.

You would be better off going self managed in my opinion, charity based DMP's work well for most people, but it's a "one size fits all operation" and doesn't always work well for everyone, as you have found out.

I would assume most charity's DMP's.work on a pro rata basis.

Do you think another solution may be better for you ?
What is your current debt level ?

Edit, what crazy cat lady suggests is also an option.

gilmum

We started with a debt of around £62,000 and I am not sure exactly what it is now as we don't get statements from some of the creditors but I think it is around £52,000. I know that we have reduced by £10,000 since we started which is good but during the 2 years we have paid £31,200 to creditors. My husband and I have good well paid jobs but got quickly into massive debt due to a period of unexpected unemployment when we had high outgoings and then an unplanned baby. We wanted to try and get on top of the debt as soon as possible so made our mortgage interest only to pay as much back on the expensive debts as possible (before the DMP) but this has back fired as the more money we repay on the debts the less chance there is of reducing the interest. We tried to go back to repaying the mortgage (which would have cost us £600 extra per month that we couldn't put into the DMP but the mortgage company won't let us as we "can't afford it" because of the DMP. So we are stuck in our late 40s unable to repay our mortgage which we have £150K to repay and years of DMP ahead of us as we are paying so much interest.

sourcrates

I can see your predicament, if a creditor won't voluntarily stop interest on your account, there's a simple choice for you, you either continue as you are, paying 26%, and getting no were fast, or you default on the account altogether, and as the other poster mentioned above, stop all payments to them until they get fed up and sell the debt on.

Now it's not as crazy as it first sounds, once a debt is sold on, there will be no further interest or charges, you know exactly what's left to pay.

Debt collection agencies will also be more open to settlement offers, it can take many months for an account to be sold on, and then chased after, years in some cases, you could save a fair amount of money to make settlement offers with in that time.

Big decision I know to cease payments, but look at it as a means to an end, you have very few choices otherwise, depends how bad you want the interest stopped I suppose.

Obviously the down side would mean negative information on your credit file, but that should be the least of your worries !!

gilmum

Thanks that makes sense - is there much chance that they would take you to court if you stopped paying ? I could lose my job if I get a judgment against me, so that's a worry. If the debt was sent to a debt collection agency would they want a budget etc because then they would see that we have enough to pay more than the minimum amount - the only way we can show we can't afford the high interest debts is to start paying the others in full (ie more than CAP's offers), if that makes sense and if we did that then the smaller debts who have reduced interest would probably add the interest back on to their accounts.

sourcrates

gilmum wrote: »

Thanks that makes sense - is there much chance that they would take you to court if you stopped paying ? I could lose my job if I get a judgment against me, so that's a worry. If the debt was sent to a debt collection agency would they want a budget etc because then they would see that we have enough to pay more than the minimum amount - the only way we can show we can't afford the high interest debts is to start paying the others in full (ie more than CAP's offers), if that makes sense and if we did that then the smaller debts who have reduced interest would probably add the interest back on to their accounts.

You don't have to show anyone anything, original creditors rarely take customers to court, the usual senario is to sell on the debt.
There would be advance warning of potential court action, but in life you can never be 100% certain of anything.