help with debt

Newdirections

Hi

I'm not sure if I am posting in the right place but I was hoping someone might be able to advise me on the best solution to my debt problem.

In short, my husband and I have debts of around 35k in total. Our monthly debt repayments are about £1000 - 1300 a month (some high apr debts), so would like to get these into some kind of secured loan or mortgage. We worked out that if we could get a 35k mortgage over 10 years, we would dramatically cut down the debt and be able to pay it off quicker.

I own a property outright (worth about 180-190k). Given our over-borrowing and fair credit, we cannot get a sizeable unsecured personal loan to consolidate these debts. We had applied for a mortgage from Nationwide, but they are dragging their heals, and it's unlikely to go through now as we have had to take out pay day loans in the last few months to survive. I lost my job a couple of months ago and I currently only work part time. My husband also lost his permanent job and is now temping all hours god sends (about 80 per week) so cash is coming in but we are barely meeting our payments because we have fallen behind. Also, I am aware that a mortgage is probably off the table for some time now as I have only just started my current part-time job, and my husband is in temporary work. I am reluctant to go with a secured loan (even if I could get one) as I know the APR tends to be quite high so we probably wouldn't end up saving that much,

Do you think there is a mortgage broker that could help our situation? Is there anything any other solution I haven't thought of?

Would It be better to go into a DMP? will this prevent me from getting a mortgage later in life?

thank you for your help

sourcrates

Hi,


I understand the frustration, and the not knowing which option is best for you, but turning unsecured debt into secured debt, is the reason at least half, if not more, of the people on this forum are here, including myself once upon a time.


It rarely works out well for people, you say yourself you've had to resort to payday loans recently, you are not in the best place workwise, even if you could mortgage, or get a secured loan, I think it would be a massive mistake the way your finances are at present.


Don't add to your misery, much better to default on your debt repayments, than to take out more borrowing, of any kind.
Going into debt management would only impact your for 6 years, so a future mortgage is not out of the question, get some free advice from either stepchange or National Debtline about debt management plans and other options that might be suitable for you.

Newdirections

thank you Sourcrates. I have just been on the stepchange website and put my details in and they recommend a debt management plan. I think I will call them to discuss this, but, in your opinion, how severely would a DMP affect my credit rating? Does it prevent one from doing simple things like getting approved for a bank account, or connecting utiltiies at a reasonable rate etc?

They have asked me to fill in my details and they will send me a personalised pack. Am I right in assuming that nothing is finalised (and recorded on my credit file) until I sign something with them?

Thanks for your advice

sourcrates

All a DMP is, is an arrangement between you and your creditors to repay what you owe at a lesser rate than you originally agreed too.
It doesn't get marked on your credit file as such.


What is important here, is that you understand the consequences of what your thinking of doing, ideally, you want to be defaulted by all your creditors, that way, in 6 years time, your credit file will be clear again, debt repaid or not.

what you don't want, is to enter into a DMP to quickly, as creditors tend not to default you, but mark your file "AP" (arrangement to pay), AP markers are not good, as they are almost as bad as a default, but, will stay on your file for 6 years AFTER, you have finished paying off your debts, which will potentially impact you for up to 12 years.

The advice given to most people thinking of a DMP, is to either stop all payments, or just make token £1 payments to all your accounts, until that creditor defaults you, then start your debt management plan, it also gives you time to save an emergency fund up, for life's little disasters which tend to strike every so often.

Stepchange wont tell you any of this though, as there prime function is to get you debt free, as soon as possible, but there are ways of doing things, and then there's the correct way of doing things.

Newdirections

gosh it sounds really complicated. I am not comfortable with the idea of just defaulting and not paying, I would be scared someone would turn up at my door demanding money(?) a DMP probably isn't the right way to go then...

I technically haven't missed a payment on anything yet and could struggle on like this and meet all my payments (especially if the employment situation improved) but it will be a long slog as all my personal loans run for another 2-3 years. I guess I have no choice as the DMP sounds like it does more damage than good.

sourcrates

Newdirections wrote: »

gosh it sounds really complicated. I am not comfortable with the idea of just defaulting and not paying, I would be scared someone would turn up at my door demanding money(?) a DMP probably isn't the right way to go then...

I technically haven't missed a payment on anything yet and could struggle on like this and meet all my payments (especially if the employment situation improved) but it will be a long slog as all my personal loans run for another 2-3 years. I guess I have no choice as the DMP sounds like it does more damage than good.

No need to be scared of anything, and its really not complicated at all, its a very simple process, my intention wasn't to put you off, just to make you aware of what's involved.

Unfortunately if you cant afford your contracted payments, something will have to give at some point, this is commonly referred to as your "light bulb moment", the point you realise the futility of further borrowing, to escape your debts.

Debt management, and good credit ratings, don't make good bed mates, sometimes things have to get worse before they get better, many, many people on here are in DMP`s, I`m sure a few will be along later to give you there advice.

Newdirections

thank you I appreciate your advice, I will keep looking into it

zenshi

From my perspective, if you are struggling with your payment then a DMP is certainly the Lesser Of the evils

I struggled as you are till my light bulb moment and can honestly say it's the best thing for me. I can now move forward with my life without being stressed

I'm a self employed house owner. Since being on my DMP, I have opened new bank accounts and just re mortgaged to a better rate....all this while my credit is shot to pieces

It really isn't as scary as it seems.

Ellieseleven

Hello NewDirection,

I had never missed a payment to any of my creditors before going on a DMP but I realised as Sourcrates says that eventually I had to accept the futility of what I was trying to do.

I have a well paying job and my OH had set up a gardening business but as recession hit we found paying everything a struggle as the business was not doing well. We turned to credit cards to make ends meet and I was forever robbing Peter to pay Paul.

We fought to try and avoid a DMP and threw thousands of pounds at ever-increasing interest payments making little impact on our spiralling debts.

We gave in in July 2010 with a total of £46,000 of debt (this had increased by at least 10k on the previous 12 months). I contacted Stepchange and went through our options with them and a DMP was the course of action we chose. Initially it was estimated it would take 11 years to pay back all of the debt but over the years we decreased the length of time by over 4 years.

A DMP has been our saviour, my greatest worry was going into retirement with a huge amount of debt hanging over us but now we will be debt free in approx. 10 months time and we have a lot to look forward to instead of dreading what the future will bring.

Yes, a DMP will trash your credit rating but do you really want credit again? This experience has helped me to understand my spending habits and the way I treated money in the past and I look at the way I spend money in a much more controlled fashion these days.

I would do some things slightly different, for instance Sourcrates has mentioned building an emergency fund and getting accounts defaulted early on. I jumped into our DMP and only had a months money put by, in hindsight, I would have waited for a few months and built up a proper emergency fund. All my creditors have defaulted apart from one who marks my file with AP.

We budget for everything but try to have a bit of wiggle room so that we can have the odd treat here and there and we live a fairly normal life (no-one knows we are on a DMP).

We have been able to do the normal things like change utility providers, broadband service, telephone contracts etc. but we have not taken on any further credit so our car is 10 years old and we have to save to replace things e.g. Fridge, Washing machine etc.

I felt such a failure when I first started out on my DMP and wondered what would become of us but now looking back over the last 5/6 years, it is the best thing that we could have possibly done and we look forward to having a chunk of money that we can put away and save instead of having to service debt.

Only you can decide which way to go and I wish you the best of luck in whatever you decide to do.

Ellie x

dancingfairy

Adding debt to your mortgage is rarely a good idea.
Basically if you default on unsecured debts you get taken to court, get a ccj and have to repay at a rate you can afford. If you start missing mortgage payments you could lose your house.
Also when people consolidate they tend to loosen the purse strings and very rarely end up dealing with the issues, they then run up more debt, then consolidate etc etc. Only a very very small minority of people consolidate and manage to pay their debts off.
Speak to the debt charities and discuss your options with them.
Df

dancingfairy

I think it's very much a personal decision to DMP or not. Some people are adament they will do it their way, no matter how hard it is, others reach a point where they physically can't pay their debts off as they are or reach a decision to stop, step off the treadmill and enter a repayment plan.
The option is there if you need it. I can understand your reluctance, only you will know when you're at that point.
A DMP means not making your contractual monthly payments and repaying at a rate you can afford ( asking for interest and charges to be stopped). Yes it will affect your credit rating but generally only for 6years until defaults start to drop off.
It is possible that your creditors will take you to court and get a ccj against you but this doesn't seem to be that common. It is a risk you run though.
Best wishes whatever you decide
Df
PS I think a lot depends in your job situation as well. Obviously you've both had a bad time losing your jobs so you need to weigh up whether this is a temporary blip or whether things are likely to continue as they are.