Horrified. Minimum payments for life or DMP

Grumpy_chap

Callister0405 said:

So I checked my Volkswagen online and it gave option for early settlement figure £9365. Webuyanycar values it £12.220. I notice they say valuation based on assumptions etc. also notice it says “we settle finance” do people do this? As in end their finance using webuyanycar ? I have always heard the adverts but honestly thought it was some form of scam (excuse my ignorance!)

Yes, people do that.
Check other buyers as well, for example Motorway, Arnold Clarke, local "cash for cars" traders...

Ms_Chocaholic

What are the childcare costs (£440), does your partner work part-time?

Callister0405

Ms_Chocaholic said:

What are the childcare costs (£440), does your partner work part-time?

That is for our childminder, we both work Mon-fri 9-5/8-6. My husband is half working days through the week and other half at college as he’s doing a training scheme through work, means a low wage for the next 18 months but he’ll be further qualified once finished, hopefully. 

Callister0405

Sadly we have no family help with childcare as our family live in Scotland, we live in Northern Ireland. 

kimwp

Once your husband's pay increases again, you will find things easier. Have you looked at NHS funding or similar for your daughter going to university? If you contact the university, they may be able to help with who to apply to.

I'm not sure you had your question answered - if you are going to do a dmp (having given it proper thought), then you want the accounts* to default as soon as possible, so that they will be gone in six years time. To get them to default, you have to stop paying them. If you talk to them, they may give you breathing space of several months - this will delay the accounts being defaulted.

*I'm not sure if you want all of them to default

Callister0405

Thank you Kimwp. Yes I’m not really sure what to do for the best… struggle and attempt to keep making minimum payments on things for a bit longer to see if things change, if there is an increase in overtime available etc

I had thought about letting some default and while I wait for them to default pay the smaller balances off - not sure if that makes any difference as credit history will still be wrecked but at least it would clear some 

or if I’m better to default all and save a good “emergency fund”. Then enter DMP for all debts. 

I’m looking to see where I can cut back but I don’t think it will tally up enough to make the shortfall of minimum payments… and if it does im not sure I’d clear much in much time… I worry I’ll be making minimum payments for 10+ years. Although husbands salary would improve in 18 months and both loans would be cleared in early 2024. 

Will take time to analyse it a bit more before payday

kimwp

Callister0405 said:

Thank you Kimwp. Yes I’m not really sure what to do for the best… struggle and attempt to keep making minimum payments on things for a bit longer to see if things change, if there is an increase in overtime available etc

I had thought about letting some default and while I wait for them to default pay the smaller balances off - not sure if that makes any difference as credit history will still be wrecked but at least it would clear some 

or if I’m better to default all and save a good “emergency fund”. Then enter DMP for all debts. 

I’m looking to see where I can cut back but I don’t think it will tally up enough to make the shortfall of minimum payments… and if it does im not sure I’d clear much in much time… I worry I’ll be making minimum payments for 10+ years. Although husbands salary would improve in 18 months and both loans would be cleared in early 2024. 

Will take time to analyse it a bit more before payday

I sympathise, it's a difficult decision to make if you feel the situation might change. I wrote down the steps I would take if I were in your position in case it helps:

1. Review the past year of bank statements to get an accurate SOA. Add everything up in the right rows (add rows of you need to) and divide by 12 to get the monthly averages. 

This will help you decide if you can keep going with some cutbacks or go into the dmp. You can project forward to see what the situation will be in 18 months, decide if overtime or a weekend job can help cover the deficit etc.

2. If you decide to go for a dmp, stop paying all your credit cards and loans (straight away). This will stop interest being added and allow you to build up an emergency fund. You won't be able to access more credit for a while, so having emergency funds is important - if you need to replace a washing machine or help your daughter with uni expenses, it will be much better to have that money in your pocket rather than having paid off a debt early to no advantage (as the interest is stopped).

3. Start a diary on here. Things are a lot less scary when you have the company of others who have or are going through the same thing.

4. Figure out what to do with the car and mobile phones.

kimwp

5. Google "Ireland bursaries nursing degree" (or get your daughter to do it) - there are department of health and other bursaries available.

RAS

I know it all feels doom and gloom, but actually you've got quite a decent surplus of income over core expenditure, so you can nail this once the creditors stop charging interest.

It's a good thing to look at all your expenses and decide if you can improve your situation but don't beat yourselves up over this.

If you are going to do a DMP, you need a new (basic) bank account with someone who is not part of any financial group to whom you owe debt. Or they can raid your salary to pay offset debts elsewhere.

Do you and hubbie have any joint accounts, or are they all joint? If hubbie has a sole account that is not in the DMP with a group with whom there are DMP debts, there is a risk that the creditor will offset debts. So, make sure he also has a clean sole bank account if necessary.

Then stop paying the accounts ASAP and save that £1000 per month into your emergency fund. That will give you something towards a car but you need more stashed for things like repairs and even the odd trip to Scotland.

Except I'd add £100 per month support for you daughter at university. It's not a lot but she could at least eat on that.

Then re-do your SOA with a continuing emergency fund and once the creditors default start paying them pro-rata, whilst continuing to stash the money you would have paid to the others into your emergency fund. 

You could pay this lot off in 5 years and have a repaired credit records a year or two later.

warby68

The real challenge to progress is the high interest rate applied to most of your debt.

A DMP is an informal solution that helps with that and then most if not all your payment goes to capital reduction. You will only be able to afford so much towards debt in total and probably not a great deal more than the interest charge so progress will be very slow for a long time. Yes you can make some savings and manage money better but the potential amounts aren't drastic.

Think it through by all means but a DMP, carefully set up after saving a decent emergency fund and with defaults, is looking like a good solution for you. Remember its informal so can be changed if the future changes and also remember you will still be repaying the capital amount of your debts which can help with the 'guilt' - I know a lot struggle with not paying what they owe but this is a good half way house once you get your head around it.