Struggling with debt? Ask a stepchange debt adviser a question

Mooeyboy

Good morning,

Hopefully you can advise me on this please. I have just entered a DPP ( DAS Scotland) within the last few months.  I’ve just received my Road Tax/ Car insurance renewals through. Normally I would just pay these by direct debit, however I’m a little concerned that this will appear as me applying for credit. Can you please offer some advice?
Thanks 

StepChange_Patience

Mooeyboy said:

Good morning,

Hopefully you can advise me on this please. I have just entered a DPP ( DAS Scotland) within the last few months.  I’ve just received my Road Tax/ Car insurance renewals through. Normally I would just pay these by direct debit, however I’m a little concerned that this will appear as me applying for credit. Can you please offer some advice?
Thanks 

Hi there

Thanks for getting in touch.

It's great to hear you've set up a DPP and I wish you the best of luck with your solution. 

Car insurance providers will do a credit check before you buy the policy if you buy monthly instead of annually. It may mean, due to the DPP you could potentially pay more for your monthly premium. 

There may not be an issue with you applying to pay for it monthly, but it's important to check in with your DPP provider to update the monthly costs in your budget.

I hope this helps.

Patience. 

Mooeyboy

Hi Patience,

Thanks for the information. 

TheGoldenNumpty

Hi guys. Not sure how best to approach my situation so I'm hoping you can help me out.

I currently have around £14,000 of personal debt I'm trying to clear. It's not currently unaffordable, fortunately, but it is making things a little tight, so I'm hoping to find a way I can reduce my monthly payments or pay it off quicker (or both  ).

I currently owe £5,869.13 on PayPal Credit, £3,650.42 on a First Direct credit card, £3,914.38 on a Nationwide credit card, and £500 on a First Direct overdraft (which is the least of my concerns as that gets paid off and spent again every month). Current outgoings are roughly £170 a month on PayPal, £100 on First Direct, and around £85 on Nationwide (PayPal and Nationwide are minimum payments, and the First Direct is an agreed amount to pay. I may look to adjust the Nationwide one to £100 also if I can get my payments down on the PayPal one).

For context, the debt came about because I was relatively late to the game of getting credit, and it was such a novelty I used it. And used it and used it, until I found myself here. I've since been a lot better with my spending (not least because I've had to be), and now if I find myself face to face with that thing that I must have, I've been using the PayPal "pay in 3" thing, which allows me to have the thing, and stops me from putting it on credit, and I know they're entirely paid off in three months. I get that it's still technically credit, but it's ideal for someone like me who perhaps isn't that disciplined when it comes to buying things on credit with all the intention of paying it back but then not doing so. At least with setting up Direct Debits for fixed amounts I have no choice but to pay those.

Anyway, I looked at going the the 0% balance transfer route and have just applied for a Virgin Money card 16 months at 0% (sadly wasn't eligible for the 35 months card) and on the checker it asked how much I'd want to balance/money transfer, so I was honest and put the whole lot in. It came back as pre-approved, so I went for it, and... only got a limit of £2,000... Here I was naïvely thinking I'd get a limit to cover the lot and reduce it into one 0% payment. D'oh!

The question now is, how best to use this 0% £2,000 for my current situation. My main concern with this is also trying desperately to use it without increasing my monthly outgoings on these debts. My initial thinking is I use it solely on the Nationwide card, as the minimum payments on that are the smallest of the three. That way, I can look at what the Nationwide minimum payment would be and pay off the 0% at an affordable level based on that and current other outgoings. I may not clear that £2,000 in the 16 months, but I guess at that point I could look at another balance transfer card maybe? At least by then my debt will have decreased a reasonable amount rather than being (as my credit report frequently reminds me) near to my overall credit limit (which I know isn't great, which is another motivator for trying to sort this out).

I don't know, am I being too optimistic/unrealistic? And I suppose thus far I've not really considered my other two debts, which is exactly why I'm reaching out to you. Really hope you can offer me some advice. Thanks in advance.

StepChange_Aidan

TheGoldenNumpty said:

Hi guys. Not sure how best to approach my situation so I'm hoping you can help me out.

I currently have around £14,000 of personal debt I'm trying to clear. It's not currently unaffordable, fortunately, but it is making things a little tight, so I'm hoping to find a way I can reduce my monthly payments or pay it off quicker (or both  ).

I currently owe £5,869.13 on PayPal Credit, £3,650.42 on a First Direct credit card, £3,914.38 on a Nationwide credit card, and £500 on a First Direct overdraft (which is the least of my concerns as that gets paid off and spent again every month). Current outgoings are roughly £170 a month on PayPal, £100 on First Direct, and around £85 on Nationwide (PayPal and Nationwide are minimum payments, and the First Direct is an agreed amount to pay. I may look to adjust the Nationwide one to £100 also if I can get my payments down on the PayPal one).

For context, the debt came about because I was relatively late to the game of getting credit, and it was such a novelty I used it. And used it and used it, until I found myself here. I've since been a lot better with my spending (not least because I've had to be), and now if I find myself face to face with that thing that I must have, I've been using the PayPal "pay in 3" thing, which allows me to have the thing, and stops me from putting it on credit, and I know they're entirely paid off in three months. I get that it's still technically credit, but it's ideal for someone like me who perhaps isn't that disciplined when it comes to buying things on credit with all the intention of paying it back but then not doing so. At least with setting up Direct Debits for fixed amounts I have no choice but to pay those.

Anyway, I looked at going the the 0% balance transfer route and have just applied for a Virgin Money card 16 months at 0% (sadly wasn't eligible for the 35 months card) and on the checker it asked how much I'd want to balance/money transfer, so I was honest and put the whole lot in. It came back as pre-approved, so I went for it, and... only got a limit of £2,000... Here I was naïvely thinking I'd get a limit to cover the lot and reduce it into one 0% payment. D'oh!

The question now is, how best to use this 0% £2,000 for my current situation. My main concern with this is also trying desperately to use it without increasing my monthly outgoings on these debts. My initial thinking is I use it solely on the Nationwide card, as the minimum payments on that are the smallest of the three. That way, I can look at what the Nationwide minimum payment would be and pay off the 0% at an affordable level based on that and current other outgoings. I may not clear that £2,000 in the 16 months, but I guess at that point I could look at another balance transfer card maybe? At least by then my debt will have decreased a reasonable amount rather than being (as my credit report frequently reminds me) near to my overall credit limit (which I know isn't great, which is another motivator for trying to sort this out).

I don't know, am I being too optimistic/unrealistic? And I suppose thus far I've not really considered my other two debts, which is exactly why I'm reaching out to you. Really hope you can offer me some advice. Thanks in advance.

Hi,

Thanks for your post.

I wouldn’t normally recommend balance transfers as a long-term strategy for dealing with debts, but I’d need some more information about your finances to be able to give specific advice. If you’d like to review your options with StepChange you could use our online debt advice tool or give us a call to speak with an advisor.

In general, it’s usually better to clear your most expensive debts first. If you’re using a 0% interest credit card, you could use it to clear or reduce the debt with the highest interest rate.

If you’re only making the minimum payments on some of your cards, you could be paying more towards interest fees and charges than you have towards the amount you’ve borrowed. This is known as ‘Persistent Debt’ and your lenders may write to you asking you to increase your monthly payment.

There’s some more information on Persistent Debt and balance transfers here.

I hope this helps.

Aidan

Ralphs83money

Afternoon, 

I am currently mid-way through an IVA and know my review is coming up soon, is there an up-to-date Government Living Expense Guideline for 2022? 

The IVA company will reduce the amount I say I am paying for expenses (essentials) even if I can provide proof of bills if it is above the government's 'living expenses guidelines' however I believe this document is now very out of date with all that has happened and I am worried they will reduce the amount I am paying for energy and food etc., because it doesn't meet the old standard expenses set out. This then shows I have money to spare and they increase my monthly fee to them when in reality, the bill is the bill and I end up having to go without on other essentials to cover the deficit they leave me in each year. 

( I also find it interesting that the amount I pay increases but the amount to creditors never does?)

Ex_welsh_borrower

Hi, I've been on my DMP for just over a year now and 2 of my accounts with HSBC are not defaulted so I've been receiving arrears letters for the missing payments.

Over the phone they confirmed they have accepted the payment plan on both accounts for the next 11 months but I'm concerned these accounts will end up being defaulted and thus starting the default clock again when I was hoping that the date I started my DMP would be the start of the clock so to say. 

Are defaults backdated? 

Sholx

Good afternoon. I’m sure this information would be out there somewhere but I’m struggling to find. I am in a position where a DMP would be beneficial to my situation. What I am looking to find out is the real impact on credit file mainly. 

How would a DMP affect renewing my mortgage, for example? 

StepChange_Allen

Ralphs83money said:

Afternoon, 

I am currently mid-way through an IVA and know my review is coming up soon, is there an up-to-date Government Living Expense Guideline for 2022? 

The IVA company will reduce the amount I say I am paying for expenses (essentials) even if I can provide proof of bills if it is above the government's 'living expenses guidelines' however I believe this document is now very out of date with all that has happened and I am worried they will reduce the amount I am paying for energy and food etc., because it doesn't meet the old standard expenses set out. This then shows I have money to spare and they increase my monthly fee to them when in reality, the bill is the bill and I end up having to go without on other essentials to cover the deficit they leave me in each year. 

( I also find it interesting that the amount I pay increases but the amount to creditors never does?)

Hi there

Thanks for posting.

My position on this is that your budget should be an accurate reflection of your actual bills and living expenses, not based mainly on guidelines etc. I'd advise to speak with them again and ask to do the budget review based on your actual figures as you want the IVA to be sustainable. Perhaps put this in writing to them, maybe via email, to have that written evidence that you're trying to do things right.

To be honest I'm not sure where to find any current guidelines if you're keen to see them, but I'd steer clear of them anyway as it's your actual spending that matters, not guidelines.

In terms of your last point, I'd recommend asking this question directly so you understand.

I hope you get it sorted.

Best wishes

Allen

StepChange_Aidan

Ex_welsh_borrower said:

Hi, I've been on my DMP for just over a year now and 2 of my accounts with HSBC are not defaulted so I've been receiving arrears letters for the missing payments.

Over the phone they confirmed they have accepted the payment plan on both accounts for the next 11 months but I'm concerned these accounts will end up being defaulted and thus starting the default clock again when I was hoping that the date I started my DMP would be the start of the clock so to say. 

Are defaults backdated? 

Hi,

Thanks for posting.

Creditors will usually default your accounts after a few months of reduced payments in a DMP, but they don’t always. It’s in your interests for them to default as soon as possible, so that the debts drop off your credit file after six years.

When you’re in a long-term payment arrangement (such as a DMP) the creditor may hold off on registering a default if they’re happy with the offer. However, industry guidance confirms that most types of debt should default after 3 to 6 months of arrears.

If you feel there’s been an unreasonable delay in registering a default, you could make a complaint to HSBC. In some circumstances creditors may agree to backdate a default.

I hope this helps,

Aidan