Dmp

lulabelle01

Hi,

I filled out a form on the step change website earlier this week after having a bit of panic and actually sticking my head out of the sand.

I’m in £15,000-£16,000 debt (2 RBS credit cards, 1 MBNA card and two small debts elsewhere). I’m scraping by currently and making my minimum payments but the interest on these cards is going up and I don’t have the extra cash without spending more on the cards to make the payments.

The SC website advised a DMP. My first stumbling block was that when I went to apply for a ‘clean’ bank account and noticed they wanted to know the amount that went in and out each month. Currently I have a £100 overdraft that I am out of by £100 but that’s it. No saving nothing. What goes in literally goes out so I panicked and didn’t bother applying because I thought it would be rejected.

I’ve read people on here try to get an emergency fund before starting DMP how much do people usually save for this?
I’m also finding it hard to get my head around the fact you stop paying your debt to make this fund up and only offer token payments. I might be being dumb but I have never missed payment and this makes me very nervous.

How does a DMP affect my credit rating?

Sorry for the long post but there may be more questions after these have been answered! Thanks

sourcrates

Hi,


Welcome to MSE.


I have moved your post to the general forum, where you will get better responses.


You need to be opening a new basic bank account, with no OD facility, and with a bank with whom you have no debt.


You simply list what goes in to your account every month, wages, benefits etc, its not a trick question.


Debt management is a different way of thinking, and for the newbie, can take some getting accustomed too.


You absolutely need an emergency fund, you should put away something from your budget each month for this, initially, to build it up, you stop making all payments to unsecured creditors, and use that money to save.


Once you inform your creditors of your impending DMP, everything goes on hold for at least 30 days, in reality it can be as long as you like, as long as you keep them in the loop.


If you need debt management, you need debt management, forget your credit file, your priority is getting rid of the debt, expect to be defaulted, the sooner the 6 year time clock starts, the better.



There is nothing here should make you nervous, its a simple, gentleman's agreement between you and your creditors to repay what you owe, at a lower monthly repayment than you originally agreed to.


Look in the sticky posts at the top of this forum, we have a dedicated DMP support group where you can ask all your DMP related questions.

lulabelle01

Thanks for the response.

I’m just wobbling quite a bit with taking the first step. I had never even heard of a DMP until this week. I was juggling everything fine until all 3 cards sent me letters saying the interest rates were going up and so we’re my minimum charges. I don’t have the money and I’m mentally drained from juggling.

I’ll apply for a bank account later as well as get step change to send me the pack I need.
What do I tell the cards with regards to stopping payments?

It’s going to be the first time in maybe 10 years I don’t have credit card back up to help me out of holes and it’s a scary thought knowing that. How much would you recommend me having as an emergency fund?

National_Debtline

Hi lulabelle01


It's a good idea to start by sending your creditors a hold action letter. This will ask them to put everything on hold, and freeze interest, for 30 days. You can stop your payments and it gives you some breathing space to get your DMP set up. You can find a sample one here https://www.nationaldebtline.org/EW/sampleletters/Pages/Hold-action-on-your-account-%28sole-name%29.aspx.


For your bank account, just opt for a basic one where no credit check will be required. Choose a bank who isn't linked to any of your creditors. For example RBS are part of the same banking group as Natwest so you wouldn't want to open a Natwest account.


Best wishes


Susie
@natdebtline

Suseka97

lulabelle01 wrote: »

Thanks for the response.

I’m just wobbling quite a bit with taking the first step. I had never even heard of a DMP until this week. I was juggling everything fine until all 3 cards sent me letters saying the interest rates were going up and so we’re my minimum charges. I don’t have the money and I’m mentally drained from juggling.

I’ll apply for a bank account later as well as get step change to send me the pack I need.
What do I tell the cards with regards to stopping payments?

It’s going to be the first time in maybe 10 years I don’t have credit card back up to help me out of holes and it’s a scary thought knowing that. How much would you recommend me having as an emergency fund?

Please try not too fret We've all been there - well, all of us currently and previously in a DMP.

Take things one step at a time and do follow sourcrates recommendation to head over to the DMP Support Thread. You'll be amongst non-judgemental 'virtual' friends there and it has a lot of very useful advice and posts from people who like you are at the beginning of their DMP journey. Once things get going its a lot less stressful and you can put all that worry and anxiety of robbing Peter to pay Paul behind you.

NDL has given you a link to template letters that will help you formulate that first contact with your creditors and in terms of how much to save for your emergency fund - well that's up to you really. As a rule of thumb most people set aside the money they would have paid to their non-priority debts between 3 - 6 months. I'd say 3 months is a minimum, but you must make sure you do save it.

enthusiasticsaver

lulabelle01 wrote: »

Hi,

I filled out a form on the step change website earlier this week after having a bit of panic and actually sticking my head out of the sand.

I’m in £15,000-£16,000 debt (2 RBS credit cards, 1 MBNA card and two small debts elsewhere). I’m scraping by currently and making my minimum payments but the interest on these cards is going up and I don’t have the extra cash without spending more on the cards to make the payments.

The SC website advised a DMP. My first stumbling block was that when I went to apply for a ‘clean’ bank account and noticed they wanted to know the amount that went in and out each month. Currently I have a £100 overdraft that I am out of by £100 but that’s it. No saving nothing. What goes in literally goes out so I panicked and didn’t bother applying because I thought it would be rejected.

I’ve read people on here try to get an emergency fund before starting DMP how much do people usually save for this?
I’m also finding it hard to get my head around the fact you stop paying your debt to make this fund up and only offer token payments. I might be being dumb but I have never missed payment and this makes me very nervous.

How does a DMP affect my credit rating?

Sorry for the long post but there may be more questions after these have been answered! Thanks

From the sound of it a DMP is the right way to go if you are only paying minimums and are paying interest especially if a high rate. If you have a decent credit rating you could try applying for 0% deals but once you start getting to the level of debt you have it becomes harder to get these. Have you tried the MSE eligibility checker to see if you would get any 0% cards? At least then the minimums would be coming off the debt rather than just covering interest.

A DMP will affect your credit rating but borrowing more should not be on your agenda anyway. You need the debts to default asap and they will be off your record in 6 years. How much can you afford to pay monthly towards the debts?

You are correct in that you need an EF and once you default you should direct your payments to that instead as you wont get credit. I would not bother with token payments just offer what you can afford if you are self managing or leave it to stepchange if they are managing it. Do an soa and make sure you allow for everything. Better to underpay to start with until you have adjusted to living without credit and built up some emergency savings.

You need a basic bank account not connected to your creditors.

enthusiasticsaver

You should not be rejected for a basic bank account. You cannot go overdrawn and you need to get to grips with what is essential expenditure. Your income and your basic outgoings (rent, mortgage, utilities) are the only things you should put down. You don't put debts down as you don't know what the agreed DMP payment will be yet. You could put an soa up here for feedback. There is a good DMP support thread too.

lulabelle01

I’ve just set up a new clean bank account not as scary as I thought.

If I ask my cards to hold all payments for say 2-3 months so I can build up an emergency fund are they likely to accept this?

Suseka97

lulabelle01 wrote: »

I’ve just set up a new clean bank account not as scary as I thought.
If I ask my cards to hold all payments for say 2-3 months so I can build up an emergency fund are they likely to accept this?

Okay - here is where your mindset needs to change (and it will over time). What you don't do is ask them to accept, or even expect them to. Just tell them you are in discussion with StepChange regarding your financial situation and will be in touch again in due course. They will put your account on hold for 30days and then probably ask you to contact them again - if they do, then you simply say the paperwork is still in progress. Or you can tell them that your DMP payments will commence in x month (3 - 6 month on).

Not to be harsh - but you are simply an (account) number to them and they are pretty used to the drill with regards to DMPs, so it won't be a problem - not in such a short time.

sourcrates

Just to back up what sueseka97 has said.

You tell them what’s going down, you do what you feel you need to do, you do not seek there approval, you tell them your intentions, and it’s up to them to accept, or not, either way it does not effect what you do.

TriggerHappy

Hiya

So I started my DMP 5 years ago and managed to get it all paid off about a year and a half ago.

It's scary to begin with, but that's because it's new and you'll be beating yourself up thinking you've somehow failed and you're a terrible person.

You're not, you're just accepting that you need a bit of help as your current set up is not right for you. Once the first payment to your DMP has come out and you've experienced the 'nothing very interesting' happening afterwards that you're expecting to happen then you'll breath a huge sigh of relief!

Glad you got your basic account sorted.

As for a payment holiday (or reduced payments rather), you're telling them not asking them and your DMP provider will support you all the way so if you're a bit nervous then you should speak to them and they'll reassure you.

Right now is the time to A) buy anything which you really need but have been unable to afford and save a little pot of money. Aim for at least a months pay to keep as a contingency fund.

Trust me, in three months time it'll all be old hat and laughing about how you stressed it

The final thing I personally recommended is to take an active interest in your DMP and don't just write the money you pay off each month and wait for it to end. Ideally you'll be checking your balances and updating your DMP monthly, challenging any interest added (not monthly, but every 3-6 months ask if it can be reviewed and reduced) and have a separate savings account to chuck in a few extra quid here and there to try to make a small over payment twice per year.

Good luck!