Stay in Debt or Use a DMP, whats right for me?

GeorgianaCavendish

You've done really well to post here, that's a big first step in facing up to debts. I was also someone who hated looking at bank statements so no judgment from me on that! 

However, the first thing to do is to get all the latest statements and really go through them to see exactly where you are spending money. If you feel like its too overwhelming there are apps that can do this for you (as long as you are comfortable sharing your financial data with them) - Money Dashboard is the one I use but I'm sure there are others. I say this because until I sat down to do my SOA and analyse my spending I was in complete denial about how much I was spending on some things ... and it didn't help that I didn't have one dedicated account for spending either so the transactions were "hidden" from me by being spread over my bank account, credit cards, cash spends etc.

It is really worth the time and emotional energy into doing the SOA and spending analysis first so that you have all the information you need to make a fully informed decision about what to do next.

AgentBigBoss

Hello. I saw someone’ s comment about waiting for debts to default before setting up any DMP etc. But while I would wait, creditors will put huge amount of interest and fees on credit cards for example tho. As without any agreement interest and fees would be not frozen, right?

sourcrates

AgentBigBoss said:

Hello. I saw someone’ s comment about waiting for debts to default before setting up any DMP etc. But while I would wait, creditors will put huge amount of interest and fees on credit cards for example tho. As without any agreement interest and fees would be not frozen, right?

It`s not huge amounts, interest is added whether you pay the account or not, so your point isn`t really an issue, it only stops on default of the account, which is mainly achieved by non payment, lenders may temporarily suspend interest if you go into an arrangement, but arrangements stay on file 6 years after a debt is repaid, so defaulting makes more sense.

You have to look long term, eventually your debts will be sold and settlement offers will be made where you can settle for anywhere between 40% and 80% of your outstanding balance, so it works out fine in the end.

AgentBigBoss

I mean for credit card with 10.000£ limit monthly interest can be around 300£. Plus overlimit fees. Wich on debt management plan is usually frozen.
Well it depends how quickly something like that would default (without dmp).

kimwp

AgentBigBoss said:

I mean for credit card with 10.000£ limit monthly interest can be around 300£. Plus overlimit fees. Wich on debt management plan is usually frozen.
Well it depends how quickly something like that would default (without dmp).

The point is that you will pay back a small proportion of what you owe, (if the debts default and go to debt collection agencies and then you make full and final offers after a while), so it doesn't really matter that fees and interest are being added.

sourcrates

Depends how you want to play it, and how bothered about your credit file you are to be honest.

Long term debt management would ideally see you save a settlement/emergency fund, your debts get sold for 10/15% of their face value, the companies that buy them will still make money if you settle for a quarter of face value, so any interest added at the start, is negated by cheap settlement at the end, not many people ever pay the full debts value off, its nearly always settled in a deal of some kind.

AgentBigBoss

Im trying to understand that ,settlement’. what if debt is sold to collection company and I only can afford smaller amounts monthly? 

sourcrates

AgentBigBoss said:

Im trying to understand that ,settlement’. what if debt is sold to collection company and I only can afford smaller amounts monthly? 

Then you do what`s right for your circumstances, just make payment of what you can afford.

We try to encourage debtors to save an emergency fund, from your budget, if you can`t do that, cut back further on what you pay the creditors would be my advice, or seek another solution, as you will need an emergency fund, if your washer breaks, fridge needs replacing, unexpected car bill, whatever it is, you will have no access to credit, so budget for an emergency/settlement fund, as its vital.

An arrangement can fail if you have an unexpected bill and no way to pay it.

ManyWays

Let’s say total debt is around 35.000£ (loans and credit cards) and someone’s only can afford to pay 600£ monthly towards debts. So what would be best solution in Your opinion?
Best would be for you to post a Statement of Affairs so we can talk about your actual situation, not generalities! 

EssexHebridean

ABB - the SOA is a necessity,  average salary tells us nothing. If you are reluctant to complete the SOA then there are limited ways we can help you, and most of those have already been explained.

If you want full support we can only give that with all the information provided to work with, otherwise we are guessing and the risk is we make the wrong suggestions.

as an example - we say “ok. Split that £600.00 monthly equally between each debt” - but it turns out that you have missed a lot of priority payments from your working out of what you have left each month, and in fact you only have £100.00 surplus, so us telling you to pay that amount to debts will in fact just leave you getting further and further in to debt. This is why we don’t offer specific advice without an SOA being completed.