HELP DMP OR SECURED LOAN

enthusiasticsaver

I agree with @Suseka97 that you are best getting your salary moved to your Barclays account assuming you have no other debts with them and include your Nationwide overdraft in the DMP.  Take the opportunity to cull any unneeded direct debits and just move over the essential ones for mortgage and utilities.  I am not sure if you are going to self manage or get stepchange to do the DMP but I would be proactive and write to your creditors asking for breathing space and just focus on building up emergency savings and getting a budget sorted. 

Bloomers83

When you ask for breathing space how long usually can you save these payments for, before putting a DMP in place? I'm most definitely going with Step change on advice from here I think. Would step change recomend you build an emergency budget up by not paying your debts or should I hold off contacting step change until I have saved a few months worth of debt payments?
Don't want to put my foot in it

fatbelly

Bloomers83 said:

When you ask for breathing space how long usually can you save these payments for, before putting a DMP in place? I'm most definitely going with Step change on advice from here I think. Would step change recomend you build an emergency budget up by not paying your debts or should I hold off contacting step change until I have saved a few months worth of debt payments?
Don't want to put my foot in it

Two or three months would be no problem with the creditors - longer if you need it.

I think stepchange would not expect you to delay your first payment for quite that long. Maybe 6 weeks

As a rule of thumb your emergency fund should be equal to one month's income so you can do the maths and work out  a timescale.

Suseka97

fatbelly said:

Bloomers83 said:

When you ask for breathing space how long usually can you save these payments for, before putting a DMP in place? I'm most definitely going with Step change on advice from here I think. Would step change recomend you build an emergency budget up by not paying your debts or should I hold off contacting step change until I have saved a few months worth of debt payments?
Don't want to put my foot in it

Two or three months would be no problem with the creditors - longer if you need it.

I think stepchange would not expect you to delay your first payment for quite that long. Maybe 6 weeks

As a rule of thumb your emergency fund should be equal to one month's income so you can do the maths and work out  a timescale.

SC include a small EF in the budget on a monthly basis, but they will want you to start the DMP pretty much within a month of completing and returning the paperwork.  So, the best thing to do is hold off contacting SC for as long as it takes for you to save an EF, using fat belly's 'rule of thumb' as a guide for how much that might be.

Bloomers83

thank you for all of your advice so far.

Just had a rather pushy secured loan broker realy trying to frighten me into thinking further borrowing was better, it just plant more questions in my head. I know that a DMP is the best way to go forward with that but I want to ensure that i do this correctly and what impact this will have on me going forward.
Two questions really or two main ones,

 if i write to the creditor is to say i wont be able to pay the monthly cost of the debt and am seeking debt help, will this mean that the interest charges as well as the overall debt in the long run will go up? so if i was building my emergency fund up with missing payments more than likely 2 to 3 months to get a months worth of income between me and my wife would this not leave me in a worse position?
The lovely Broker who aparantly has the winning lottery numbers for me has also said that it will be unlikely the companies the debt is held with will freeze interst and has known clients after 6 years to be in a worse off position? he also said that phone contracts will have to be cancelled etc.

Just want to ensure i do this correctly and am so appriciative of the advice, but also nervous as hell as taking the plunge as i have not missed a payment on anything once but the time has come to admit defeat and sort my ever growing mountain of debt out.

RAS

Put the broker on ignore. There's a nice lot of commission due to them if you fall under their spell, and possibly more when you fail to make a secured payment and they start repossession (ask @fatbelly about the last crisis).

Once defaulted, your creditors stop charging interest on debts, and the fastest way to get a default is to stop paying the debt for a few months. Which is why you've been advised to use the payments to set up your emergency fund before you sign up for a DMP.  Otherwise, you may start paying enough again soon enough to delay the default.  So even if they add interest in the first couple of months, you win big time in the longer term.

I know that there were some people in the last crisis who only paid a £1 per month on very high debts and companies were enforcing re-financiing deals and adding fees, but the creditors had to repay £Ks after the financial services regulator got involved. Doubt any creditor would be stupid enough to try that now. 

enthusiasticsaver

You need to ignore this broker.  As RAS says the interest stops when you default and I know this is scary but once the DMP is set up and you can see that the interest is stopped you will feel more in control.  As for phone contracts you may have difficulty getting new ones as the defaults will show on your credit record but if you stick with your current provider you should be ok. You do not need to cancel it.  People on the DMP thread will be able to confirm better. It is worth going on there as they have all been in your position.  There are a few people with diaries who are on DMPs too.  One broke lady has one and I think she is on a DMP.  

Bloomers83

Thank you for your advice,  just all new and nerve racking for me as I'm sure everyone else on the first steps to tackle this.

sourcrates

Bloomers83 said:

Thank you for your advice,  just all new and nerve racking for me as I'm sure everyone else on the first steps to tackle this.

I remember being where you are now, my debt in total at its peak was £77,000, everyone feels exactly the same as you do now, it can be very daunting I know.

I also considered more loans, that`s the first port of call for most, consolidation, because its easy, and you don`t have to admit you are virtually insolvent, now we have been through the pro`s and cons`s of that option, and I dismissed it them, as you should now.

The only true way to get out, and stay out of debt, is to -

(A) Balance your budget, a workable budget is essential.
(B) Choose a debt solution that meets your needs, your options are Bankruptcy/IVA/DRO/Debt management.

Each one is circumstance specific, you should not make how your credit file looks your number one priority, you need to tackle the debt, then worry about semantics.
Your credit file will heal with time, and all future options for mortgages etc will be open to you, just not yet.

Suseka97

Gosh, that broker sounds as if he's getting a bit desperate for you to sign on the dotted line.  

You may well find that one or two of your creditors will continue to add interest and charges over the next x months whilst you save up your emergency fund, but that's small change in the grand scheme of things.  Most, if not all, will put your account/s on hold and by not paying you are stacking the cards in your favour in respect of getting those defaults.  Once defaulted, then you can sit back and watch those balance reduce month by month knowing that in a much shorter period of time (when compared to that secured loan) you will be debt free.
 
He is also telling you a load of codswallop about mobile phone contracts.  I not only kept my contract, but was able to upgrade my mobile on more than one occasion.  I was also able to switch mortgage deals, change utility providers, get house & car insurance renewed as well as swapping from Sky to Virgin and back again.  I say this in case that's his next move!

Just go ahead with your plans for the DMP and block his number - or, when he next calls just tell him you've taken professional advice on the matter and pretty much everything he has claimed has been refuted. 

PS: by professional I'm referring to Stepchange of course