Time to sort the mess out - am I doing this right?

10173

Hi all

Just after some advice really....done some reading on the back of a lot of self reflection recently...but just wanting to double check that my plan makes sense.

I've never been great with money. Always spending and trying to live beyond my means. Wanting stuff now...rather than waiting. I've always gotten by....paid off something with something else...descending slowly down the debt spiral with the thought of "oh I'll sort it out further down the line". Living in my overdraft since....god about 2016....loans...credit cards....
As I write it now, I just feel so ashamed of it all. I can't tell you the anxiety, sleepless nights and headaches I've had just carrying around these bags. The pretending everything is fine.....
I sit here now, 2 weeks from payday with £s in my account wondering why I let it get to this point. I need to make a change....I need to get some decent nights sleep....I'm ready to start dealing with this and become debt free.

All in all, I'm in a reasonably good position all things considered. I have a secure full time job and just started a second job. I have a roof over my head with a manageable mortgage amount. I've got 18 months left on the fix. My gas/leccy bills aren't too bad and I'm fixed with the, until April....so I have some things controlled. But my unsecured debts just leave me with nothing left. The minimum payments that aren't making a dent on the debt.....just paying the interest...makes me sick. 

Currently I owe:
Natwest Overdraft - £2750 (I have emailed them with a request to halt fees and interest, due to being in my overdraft for years and each time they apply charges takes me back over the authorised amount, which I then have to pay off to get back under it...till the next month. They refused. So I raised the complaint with the ombudsman, who have had the case for 4 months and still not looked at it. But I worked out that fees, interest and charges have cost me in the region of £3k over the last 5 years). 
Aqua Card- £5,468.32 (My account has been closed and I believe is now with their own in house collections "arvato" and I'm paying £100 a month to them)
Marbles Card - £3,186.75 (limit £3100)
Zopa Card - £1,127.43 (Agreed to pay £25 over 6 months to clear the £127 I'm over my limit)
Barclaycard - £1,229.38 (limit £1200)
Capital One - £1386.41 (limit £1200)
118118 Card - £1496.13 (limit £1500, but about to go over limit as can't pay)
Bamboo Loan - £7,017.12 but with interest £12,209.55 (have requested them for a payment holiday last week which they said they can't do. Took this loan out December 2021 so wondering if responsible lending checks were done as I was surprised they approved it). 
Natwest Loan - £711.85 (so close to paying this off after 5 years so want to get this one at least ticked off. Currently paying requested monthly payments).
Total (if interest and charge was stopped now) - £24,367.47.....god that number scares me seeing it written down. 

My monthly payments for these have been £1100....and seeing that barely though the sides makes me sick. 

So apart from my Natwest Loan, I've had to stop all monthly payments. So my credit rating has already started taking a beating. 

I was about to go straight to StepChange and get a DMP sorted straight away...but after some reading on here people suggest holding fire with that? That actually the best option is to let things default to stop interest etc, get them on the credit report sooner so they drop off sooner rather than an agreement to pay lingering on there for years?
It just seems so backwards as I've had it drummed into me to avoid defaults at all costs.....hence why I've been paying minimal payments for years. I just hate the thought of dealing with the collection agencies but I think I'd rather self-manage as each one defaults rather than use a DMP through StepChange.

I've got a decent interest rate on the mortgage for another 18 months so if I let things start to default next year, then I fix for 5 years with Natwest in 2024 (who my mortgage is with) then my credit rating will look a lot better come the next time I have to remortgage as the defaults would be gone after 6 years. 

I was going to look at going via StepChange for breathing space for 60 days...just to give me over the Xmas period to clear my thoughts etc. Would that still be a good option? As I believe that my debts could still move towards default as I won't be making payments, but they will halt interest, charges etc during that time?

Just typing this is making me feel better. The thought that if I stop the unsustainable monthly payments, pay back what I can afford to and start putting what's left into an emergency fund that I will have that cushion (of my own money) just in case. Something that I've never had....

10173

Oh and am I right in saying that once they have defaulted, that the collection agencies have to accept my offer of monthly payment? They can't demand that I pay X amount if I tell them that's unaffordable for me?

MalMonroe

Hello, and welcome.

First of all, you are not alone. Many of us on here have been in a similar situation.

Secondly, YES, please do this (from your OP above) - "I was going to look at going via StepChange for breathing space for 60 days...just to give me over the Xmas period to clear my thoughts etc. Would that still be a good option?"

You have already prepared a statement of account, as in your OP and that's what you will need for a discussion with someone at StepChange.

I would suggest phoning them rather than contacting them online because I found that just actually talking to someone on the phone about all my debt and my worries and troubles was very beneficial. Once I'd unburdened myself, I really was able to sleep much better at night. The adviser I was allocated was friendly, helpful and non-judgemental. I know that feeling of great embarrassment and awful failure. But my adviser was great and said none of that mattered any more because I was on the road to debt recovery.

https://www.stepchange.org/

I am now debt free. It wasn't easy and it wasn't quick but I came out of the other side and now I am able to manage my finances in a responsible manner. There was a time before StepChane when I'd receive bank and credit card statements and put them in a drawer, unopened. I did that for years. Until finally things caught up with me. 

I wish you all the best but you are on the way now to helping yourself. Make that call to StepChange and I'm sure you won't regret it. 

fatbelly

Personal opinion - formal breathing space is a waste of time. Nothing's going to happen in 60 days anyway.

You need a new bank account for your income and essential direct debits - put the Nat west overdraft into the dmp. Your new bank account must be with someone unconnected to your debts

https://www.moneysavingexpert.com/banking/compare-best-bank-accounts/

RAS

And yes, we recommend that you do not just head straight into a DMP until you get defaults. Arrangement to Pay markers stay on your credit file for 6 years AFTER you've paid off the debt, whilst defaults drop off 6 years after the default even if you still owe money. 

Guess which looks better when you want to re-mortgage?

It also gives you time to learn how to live within your budget and to save whatever you might have been paying your creditors to build up an emergency fund. And to start putting aside money for known annual spends rather than each of them creating a mini-crisis. If you've not really budgeted before it will take time to get a handle on all your expenditure.

You will get letters demanding that you repay the entire debt and advising of the possible legal penalties. I could come round and thump you? And may be able to find your address? Of course, the chances of either happening are infinitesimal, not least as I don't thump people. But those letters will contain the words could and may lots of times. You just need to hold your nerve and wait for the defaults.

Then you can set up your DMP or ask Stepchange to run it. Some people find it easiest to let Stepchange make the in initial arrangements, not least as creditors respect that the budget given is "sanctioned" and they won't get any more if they take legal action. But many prefer to take over once things are settled.

Rob5342

10173 said:

Oh and am I right in saying that once they have defaulted, that the collection agencies have to accept my offer of monthly payment? They can't demand that I pay X amount if I tell them that's unaffordable for me?

They will normally accept what you can afford. They are well within their rights to take legal action to recover what you owe and you can never be 100% sure they won't. If they did and got a CCJ then you'd be able to pay in instalments at a rate you could afford, which would be the same as your dmp payment was. The collection agencies know that and are very unlikely to go through the cost and hassle of getting a CCJ that would only result in them getting the same payments from you. Legal action is a last resort, if you are in contact with them and making repayments then it's highly likely to go smoothly.

If you stay with the same mortgage lender then you can change to a different deal without a credit check. I have four defaults on my credit report and switched my Santander mortgage to a new rate with no trouble at all. I'd suggest you get started as soon as possible.

I was in a similar position and had £42k of credit card debt, but starting a debt management plan really turned things round for me. I immediately felt relieved knowing it was in hand with a single payment each month, and after a few months it felt tremendous seeing how much I'd paid off something I'd had for so long.

I did mine with Stepchange to begin with but later moved to managing it myself. Stepchange were good but took quite a fixed approach of simply paying it off, doing it myself was more flexible as I could stop paying the ones that hadn't defaulted me to force a default. Stepchange are quite good to start off with as you have someone to support you with letters etc that you aren't familair with. Once I was familiar with it all I found managing it myself very straightforward. Dealing with the collection agencies was no trouble at all, I jsut sent off a letter stating me repayment with a budget, set up a standing order, I got a confirmation letter from them and that was that. 

Rob5342

RAS said:
You will get letters demanding that you repay the entire debt and advising of the possible legal penalties. I could come round and thump you? And may be able to find your address? Of course, the chances of either happening are infinitesimal, not least as I don't thump people. But those letters will contain the words could and may lots of times. You just need to hold your nerve and wait for the defaults.

They can be very scary at first, saying things like the full amount will become payable and they could sell the debt to a third party who could take legal action to recover it. Once they do default the next thing you get is a letter from a debt collection agency asking you to set up a repayment plan.

kimwp

I'm not 100% sure, as it's not clear at what time accounts default, but I think the breathing space will delay the defaults if anything. (It's to give you time to get back on track, if they agree to it, then default you soon after they could be seen to be acting unfairly)

Your best route is to spend a couple of days creating a proper SOA (template in my signature) and posting it here (format for MSE) so experienced people can comment on the best option for you - 60 days pondering won't change the situation except to put you in more debt.

EssexHebridean

Also voting here with others that if the long term realistic option is debt management, then breathing space now just delays the point when you will be ready to get into that process. If your SOA (as above) shows that in fact making the monthly payments IS possible going forwards, then breathing space could let you build a small emergency fund and get your budget in order, however. I'd personally suggest that whether it's the right option for your depends entirely on what the SOA shows. 

10173

Thanks all for the wise words. I will complete and post the SOA when home tonight. 

I already have a bank account with Starling so all my wages etc now go into there. 

One thing that does concern me is that if I default or come to an arrangement with Natwest regarding my overdraft and remaining loan, will that affect my mortgage with them? Had the mortgage now for 3 years, never missed a payment with them on that. 

Rob5342

No it wont affect the mortgage, it's a seperate account. You will still be able to switch to a new rate as that doesn't involve a credit check.