DMP or 'just pay your debts', nothing in between?

dnjanjnnkndk

So, like a lot of people on here, I am in a lot of debt. Not really relevant, but I used to be a high earner, double income, and now I am an average salary earner, single income, so it took a few years to get finances aligned and I went into lots of debt.

I recently contacted StepChange to get help. From the conversation with the adviser, I understand there are only 2 options:

- Go onto a DMP, which will affect credit for a long time period

- Pay your debts in full with no assistance from anyone, and with full interest until paid in full

I was hoping there would be some kind of in between solutions available, e.g. help negotiate an interest free period of perhaps 6-12 months while I come to grips with a life change. I have previously negotiated an interest free period independently and it really helped me make a dent in my debt and make it somewhat manageable.

For context, a couple of years ago I was 50k in debt, and I have now managed to get it down to 38k, largely thanks to freezing my ability to spend and interest alongside it.

I pay 60%+ of my salary to repay debts and have lived like this for a number of years. However, it's no life and I am looking for ways to break free from this cycle.

Surely it is also more beneficial for my creditors to give me a prolonged interest free period and then charge me interest again, as opposed to see me go on a DMP and get no interest at all going forward?

Hope someone can help? Otherwise my plan is to negotiate with lenders individually, ephasising the fact that them giving me a grace period is better for them than me defaulting and going onto a DMP.

NeverendingDMP

You need to look into the difference between arrangement to pay markers that stay on your file for years after you have paid the debts compared to defaults that disappear after six years (UK) whether you have paid the debts or not.
And look into posting a soa -summary of affairs (budget) then people can advise you better.
Better advice will follow but this is the starting idea of what to do. Good luck!!

TheAble

On a DMP you pay no interest. Why would you want to start paying interest again? I think from the lenders' point of view they are happy just to get their capital back.

fatbelly

A dmp, itself, does not affect your credit file. What happens is that the individual lenders put a mark on their entry.

As you have had several arrangements, you may already have some.

There are lots of strategies for dealing with debt. If you can post a statement of affairs we can suggest what might work best for you

RAS

And check all three of your credit records to see which debts are already defaulted and which have AP markers? It's free via MSE.

Rob5342

It's often better to take the bull by the horns and get it sorted once and for all. If the debts default the interest will be frozen for good they will be sold to debt collectors who will accept a reduced settlement offer, so.it would cost you far less overall than paying the full amount with extra interest added.

Your plan is very counterproductive. You would be paying much more over a much longer period to try and keep your credit report in a state that would let you keep borrowing. If you cleared it sooner and for less then youd have a lot more spare money so you be less likely to need to borrow again.

sourcrates

Individual creditors may freeze interest on a temporary basis, usually up to 6 months, but if you ask for any longer than that, they will simply deny your request and refer you to one of the debt charities.

Creditors are commercial companies, they are not there to help you out with debt advice, or debt solutions either, they exist to make money from you, and once they stop doing that, they will off load you quicker than you can blink.

Spending 60% of your wages on debt repayment cannot continue long term, and from what you have posted, it appears you want to keep the lines of credit open, and preserve your credit worthiness, but also want the creditors to accept interest free payments for a year or more, a have cake an eat it scenario.

Unfortunately things do not work in that way, and something has to give, anything less than full contractual repayment will eventually result in account closure and defaults, so you may as well do the job properly from the start.

Your SOA will tell us more, but debt management is the likely end result here.

Rob5342

I was in a similar situation once and kept putting off a dmp in the belief that I could somehow sort it out while maintaining my credit rating. It was only once I'd accepted that I'd have to start a DMP that got a proper handle on it.

enthusiasticsaver

I am not sure why you would not  go onto a DMP  as surely paying no interest pay help you actually get free of the debt noose. The in between option is an arrangement to pay where you negotiate with lenders but that actually has a worse effect on your credit record and the markers stay on your file longer plus they may not necessarily freeze the interest. Worst of both options.  

Having said that if you can afford to pay the debts and interest simply by better budgeting I would always opt for that. 

dnjanjnnkndk

Hi all, thanks for your replies so far!

Just to be clear, I have never ever defaulted/late or paid less than the minimum amount over 8 years or so, on any account of any sort. I have a perfect repayment record. I have had ‘plans’ previously but what I have managed to do is negotiate with creditors independently and have agreed plans like ‘zero interest, no use of card for 6 months, payment £50 a month’. However, I have in fact always overpaid to make at least minimum payment to not leave a mark on my credit record. What’s more, my credit score has gone up 25 points this year alone, and I’ve actually started having smaller 0% balance transfer offers come through.

Why I’m also not keen to default… My fiancée has a mortgage and we’ve talked about me getting on the mortgage (I have about 30K  locked in a LISA), I want to have joint accounts with her in the near future, all the normal stuff that couples have. She knows about my debt, how I incurred it, and that I am doing something about it.

As for my budget, I’m not sure how that would help with the question I am asking. However, as a top line, I have a net income of £2,200 and after basic bills (house, food, petrol), the remaining £1,300 goes on debt. Some months I get extra money and then that goes on topping up debt payments.

Just to be clear, if I wanted an ‘interest holiday’, ‘breathing space’ or something similar, StepChange or any other organisation cannot help me with that, this is something I need to negotiate with creditors myself?

I may consider DMP again end of year. 

fatbelly

I'm not sure if this is what you are asking but if you want formal breathing space then you do have to go through a recognised provider and stepchange are probably the biggest one

https://www.stepchange.org/how-we-help/breathing-space-scheme.aspx