Horrified. Minimum payments for life or DMP

SusieT

There is a lot of very good advice above. I would agree with those who say DMP and let them default. You may even be able to go self managed to start with to keep payments going only to those who default you unless Stepchange or Payplan will allow you to only pay those who have issued defaults. If you decide to self manage then, 
1. Stop paying them all (except HMRC)
2. Do not contact them by phone or writing, and ignore any scary letters. You do not want them to give you breathing space, and they often will if you contact them even if you say no.
3. Save the money you would be paying them as an emergency fund, do not spend it unless it is an emergency!
4. Now add up all that you will have to pay each month, divide it by the total debt that you have stopped paying, and x 100 to give you the percentage of each debt that you will be paying (e.g. 1000/40000*100 = 2.5%)
5. As each debt defaults (this stops the interest being charged) you pay them 2.5% of the starting balance each month

You have already identified things in your budget where you can save some ££ but things like a coat for your daughter may be found in charity shops as they often have new or nearly new things in there, also presents can be had for very little, so well worth looking in them to see if there are things you can find. 
Start to buy little long lasting bits of food for the December eating festival, so that you do not have a big bill at a time the wages are often paid early in December and then a long month in January before the next wage hits. 
Will you need to up the gas and electric for the winter, or are you on a fix or have enough credit with them? That is worth keeping in mind now the nights are coming in. 
Good luck with it, you should find that once you have settled into an affordable budget and repayment schedule you will get through it and be debt free in a reasonable timeframe

Rob5342

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

That's the way I was thinking before I started a DMP. I thought it might be better next year etc, but in reality it never was and I just carried on struggling year after year getting nowhere with them. I'd suggest you get started on a DMP now, that will give you a clear end date when all the defaulted accounts have fallen off your credit record. If there is an increase in overtime you can always pay extra off and get it cleared sooner, but if not then you'll still be in a sustainable position with your debts going down. It look me a long time to get started on a DMP, but looking back I wish I'd done it a lot sooner.I'd let them all default and put the money into an emergency fund while you wait. That puts you into a position with the maximum possible emergency fund and no interest to pay, then as you go through the DMP you can see how it goes and save more or make extra payments off debts. Remember a DMP is flexible, so you can get started on one immediately, and then increase payments as you find ways of cutting back, or reduce payments if circumstances change.

Dont be ashamed about it, look forwards instead of backwards, this is your opportunity to take charge and get yourself into a much better position. I ran up credit card debts of £42k over 11 years and I thought it would never end, but after 16 months on a DMP I've got it down to £31k (and after making CCA requests it looks like only £4.5k of that is actually enforceable)

Callister0405

We share one joint account. Then our own sole accounts. I don’t think we have any debts that are linked to our accounts the loans are lendable and updraft. 

Thank you all for the advice. Yeah I had thought keep pushing on and see if I got a few cleared would I then be eligble for any balance transfer cards but I think it’s too messy now and I will just have to go down the DMP road. It’s frustrating but needs must as they say. 

Callister0405

Does your credit history then not repair for at least 6 years from default date? The idea of having 8+ defaults makes me cringe. Not that I would be wanting any form of credit but we had often pondered the idea of co ownership (our home is council with right to buy) so that would be out the window for 6 years then we would be approaching 40 which may be too old? 

That is all what ifs anyway, just have to sew with the here and now.

kimwp

The defaults don't drop off for six years, but access to credit, mortgage etc will depend on how long since the defaults, payment history since then etc- it's not that you have no chance for six years. When you've had time to pay off the debts and build up a deposit, I imagine you'll be some time away from having defaulted so it's probably not worth worrying about x

macman

I'm going to encourage you to spend more, by getting some contents insurance. To neglect that, yet spend £1,020pa  on 2 mobiles is not a good way to prioritise.  2 x cheap Android smartphones, £100 each, cheap contract SIM, £6 a month. Total first year cost, £344.
The good news is that you appear to have £3k equity in the car, so sell that, buy a £1k runner and that's an instant £2k off your debt.
I'm not clear if you have been buying a new car every 2/3 years, or a new used car, but, if the former, why would you need an warranty package on it? Any new car comes with at least a 3 year warranty.

Grumpy_chap

macman said:

I'm not clear if you have been buying a new car every 2/3 years, or a new used car, but, if the former, why would you need an warranty package on it? Any new car comes with at least a 3 year warranty.

I read it that the OP has had a new (brand new) car every few years on PCP:

Callister0405 said:

Regarding the car that is true I could get a reliable one which would be more cost effective I’ve just never had to think about it before… I need to look over my agreement as I think it is a lease… I tend to take them for 3/4 years then I have the option to purchase making a large end of agreement payment, hand back and walk away or transfer to new car.

As I have previously never had any money issues I have just always changed it around the 2 year mark (early). It has just suited me with work and usually get a deal to include first 2/3 services & warranty, so any issues I have I just contact them and it is usually dealt with fairly quickly without a big bill. 

So, that's a brand new car with warranty and then buy the optional service plan, so everything is turned into deposit plus monthlies and the final payment is never paid.

Rob5342

Callister0405 said:

Does your credit history then not repair for at least 6 years from default date? The idea of having 8+ defaults makes me cringe. Not that I would be wanting any form of credit but we had often pondered the idea of co ownership (our home is council with right to buy) so that would be out the window for 6 years then we would be approaching 40 which may be too old? 

That is all what ifs anyway, just have to sew with the here and now.

Things will be harder with defaults, but it wont be completely impossible to borrow. You need to consider the implications of the alternatives, having a high level of debt might be enough to stop you getting credit whether you had defaults or not, and if you don't take care of things now it might get even worse and you might get defaults later anyway. Alao once the debts are repaid you'll have a lot more spare money so may have less need to borrow.(or borrow less if you have saved more) Defaults seem scary at first but they are quite beneficial in a lot of ways. Once you have them interest is frozen and you have a fixed date when they will drop off. Also once defaulted the debts will probably be sold to debt collection agencies who may accept reduced settlement offers.Having been in a similar postion I'd suggest that you start a DMP and get it sorted once and for all, the only regret I have is not starting a DMP earlier.

This artice covers getting a mortgage with defaults.

https://debtcamel.co.uk/mortgage-recent-defaults/

Callister0405

Yes it’s always a new car on PCP, I will look into getting it sold and finance  settled and hopefully I can find something else that will still be reliable. 

I have no idea why I have never thought of contents insurance, seems silly now.  I will get some quotes this evening.

yeah a mortgage would be way down the line and I’m still not sure it is something we would do or not, part of me has the “should really own a home by this age” idea. Other part of me things I am in a secure lifelong tenancy in which everything is fixed when needed so why would I commit to ownership. Would only
be as a benefit for the children really once we drop one day. 

So I shouldn’t worry about defaults … once they do default and I commence DMP do the calls and letters slow down? I dread that part.

RAS

The current difficulty is that you have quite a lot of debt at 30%+. Even if you are paying 3% minimum you are never going to reduce the capital until you can over pay. Which is why the creditors actually love people like you.

By all means snowball the debt by running it through the calculator Snowball Calculator (lemonfool.co.uk) assuming your current income and then adding hubbie's increased income in 18months time and see how it works.

But basically, even ithout hubbie's increased income, you can clear the defaulted debt before the 6 years is up, as long as you play hard ball.

What you also need to consider is that you may actually struggle to get another car deal in two years anyway, so have to save up for a replacement. 

Even with hubbie's increased income in 18months, your debt level will reduce your capacity to get a mortgage. Do go over to the mortgage forum and chat to one of advisors there. Several of them provide free advice to forumites.