Is it time for a DMP or try to ride the storm?

CurlyTop11

Hi all,

Just looking for some advice regarding my situation really. I haven't posted here before, but have regularly read the different threads and have found them very helpful. My situation is as follows:

- I have been in debt of some kind since around 19 years old and have never been debt-free since this point.
- Current unsecured debt approx £31k across different cards and two loans (will post SOA).
- Debt accrued mainly down to just overspending, not saying no to anything I couldn't really afford as I was 'young and didn't want to miss out' etc. As my income has risen over the years, then trying to be 'clever' about it. I.e. shifting money around different cards but then not changing any habits. I know this is absolutely not the right way to go about things, but having a general lack of financial education/experience this is the way it went.
- I am currently meeting payments (very high at £1,300 per month) and have never missed a payment, so have a clean credit rating in terms of that (although not a great rating due to amount of credit and disposable income), however things are becoming really tight.
- I am 31 and currently live at home with parents so this is also less than ideal.
- MOT on car due in a couple of months and dreading this if it is a bad one.
- Car insurance due next February and nothing for this put away separately at the moment.
- I am best man for my best mate's wedding abroad next year. I am currently putting £60 per month to the side each month for this (in holiday on SOA). I know most people may say this should be knocked on the head, however given I have now cut back on pretty much all other 'going out/entertainment' this would be the only thing to look forward to on the horizon (have already paid for flights and accommodation).

I would say that previously, I have sort of avoided the situation in my own head (as I'm sure many have). I have now admitted to myself that this is a major issue, and for the last few months have been tracking my spending through spreadsheets and making sure I give every bit of spend a certain category. For example, I'd never thought of putting car maintenance money away monthly etc (seems obvious I know and was probably me just being ignorant).

I have recently been thinking whether a DMP would be the right thing for me to do at this stage. It definitely would be a bitter pill to swallow, given that I have never missed a payment, although if it was required, it is all part of me learning from past mistakes. I would also be able to save up a pretty decent amount from not making payments, given the high amount of the minimum monthly payments. This could then be the start of an emergency fund and could potentially be used for offers later down the line.

Questions I have regarding this would be:

1) Can you pay whatever amount you want to the creditors if self-managed? I'm not saying be ridiculous, but I mean leave myself the ability to save up and hopefully one day be in a position to offer full and final offers?
2) I know a mortgage would be out of reach for a long time, but once the final default was off my report, would this be possible? So long as all debts were fully paid?
3) With regards to renting, again would this be possible whilst in a DMP? Say in 2 years time even?
4) Is it completely random how quickly different creditors go to default? I.e. creditor 1 after 2 months and creditor 5 could be after 6 months?

One half of me really wants to avoid a DMP thinking 'well I have got myself into this situation' and it's not the right thing to do and also the effects of doing a DMP, but then the other half (after reading people having 'success stories' from them) thinks that over the years I have paid obscene amounts of interest to creditors (I would estimate up to £30k - sickening), so I need to do what is best for me at this stage and if I could save a substantial amount in the long run, then maybe it would be the best thing to do. I have also read things from people saying that the release of stress after starting a DMP was huge and it was no longer all consuming.

I know this is a long post, so thanks for reading and would appreciate any thoughts.

CurlyTop11

SOA below:

[font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]

Monthly Income Details[/b]

Monthly income after tax................ 2165

Partners monthly income after tax....... 0

Benefits................................ 0

Other income............................ 0[b]

Total monthly income.................... 2165[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 0

Secured/HP loan repayments.............. 0

Rent.................................... 200 (Don't pay for any of the others below separately as this is rent to parents)

Management charge (leasehold property).. 0

Council tax............................. 0

Electricity............................. 0

Gas..................................... 0

Oil..................................... 0

Water rates............................. 0

Telephone (land line)................... 0

Mobile phone............................ 36 (In contract until June 2024 - will go sim only at that point)

TV Licence.............................. 0

Satellite/Cable TV...................... 10.99 (Netflix)

Internet Services....................... 0

Groceries etc. ......................... 240 (including specific dog food & other items such as waste bags etc)

Clothing................................ 0

Petrol/diesel........................... 80 (Mainly just driving to work)

Road tax................................ 12

Car Insurance........................... 0

Car maintenance (including MOT)......... 0

Car parking............................. 0

Other travel............................ 0

Childcare/nursery....................... 0

Other child related expenses............ 0

Medical (prescriptions, dentist etc).... 0

Pet insurance/vet bills................. 85 (Have looked at getting cheaper, but dog has different tablets which go through insurance so wouldn't work out any better. Tablets are £60 per month on their own, plus other insurers won't take on pre-existing condition.)

Buildings insurance..................... 0

Contents insurance...................... 0

Life assurance ......................... 0

Other insurance......................... 0

Presents (birthday, christmas etc)...... 0

Haircuts................................ 0

Entertainment........................... 85 (Gym membership - tied in until January 2024. Football season ticket.)

Holiday................................. 60 (Wedding - as previously mentioned)

Emergency fund.......................... 0[b]

Total monthly expenses.................. 808.99[/b]

[b]

Assets[/b]

Cash.................................... 250

House value (Gross)..................... 0

Shares and bonds........................ 0

Car(s).................................. 6500

Other assets............................ 0[b]

Total Assets............................ 6750[/b]

[b]

No Secured nor Hire Purchase Debts[/b]

[b]Unsecured Debts[/b]

Description....................Debt......Monthly...APR

Lendable.......................7530......553.......15.65 (Final payment Dec 24)

Zopa...........................11501.....411.......17.2 (Final payment Jan 26)

RBS CC.........................2075......50........16.9

Fluid CC.......................2054......22........0 (0% until Feb 24 - 30% thereafter)

Halifax CC.....................1740......55........16.9

Barclaycard CC.................3980......150.......0 (0% until Dec 24 - 17% thereafter)

MBNA CC........................2168......65........16.9[b]

Total unsecured debts..........31048.....1306......-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 2,165

Expenses (including HP & secured debts). 808.99

Available for debt repayments........... 1,356.01

Monthly UNsecured debt repayments....... 1,306[b]

Amount left after debt repayments....... 50.01[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 6,750

Total HP & Secured debt................. -0

Total Unsecured debt.................... -31,048[b]

Net Assets.............................. -24,298[/b]

[i]Created using the SOA calculator at www.LemonFool.co.uk.

Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]

Nothing in for car maintenance or insurance at the moment, but something I am aware I need to budget for. Just posting as it is right now.

Grumpelstiltskin

Well things will start to go downhill from next February when the Fluid interest kicks in.

Any chance of temp. part time earnings?

in_need_of_direction

have you anything you could sell?  also, if you really are only spending £80 per month on car fuel, could you do without a car?  you could use the proceeds to wipe out the 3 smallest credit cards to start overpaying elsewhere.  it's just over a year until one of the big loan payments stops, if it were me, i'd be looking to juggle things until that gives a fair bit extra.

hope it all works out for you

Rob5342

Have you actually lived on that budget for any period of time and seen the debts come down? 

LoulaBelle

what were the loans and credit cards for, what have you been buying? anything you could now sell?

stu12345_2

10 yrs of paying the min on credit cards really got me in my mess,( the killer interest) it wasnt till i started a DMP, that the creditors stopped the interest, (plus if debt get sold to a third party, the third party definitley stops interest and charges, it  was that got me to drop the balance by £10,000 in 15 months, no interest.
i found if you dont pay the correct min monthly payment due on the debt as stipulated in the credit card/loan agreement for 2 months or more, it goes to default.I was told oh your credit status is messed up, so what I said, just let me get rid of these debts. I cant afford a new car or take a mortgage anyway,  a bank would say i couldnt afford it anyway.
I'm starting my own DMP, and leaving a no cost charity based one,  i plan to save up during my DMP, as i can set my limits and jiggle it about that allows me to squirrel some money away and eventually make full and final payments. eg perhaps use less food or gas, electricity, clothes, one month, then,  that goes into my savings kitty for full and final payments.I found the free charity based one had guidelines that they thought was too high regarding expenses. so now im doing my dmp myself.

I though the main purpose of a DMP was to start making payments to creditors , even tho the amount is below the credit agreement min and give me a reasonable quality of life and pay off the debts as fast as i can.
BUT i went wrong by stating tiny amounts for expenses in order to pay the debts of fast( after all all charges and interest stopped on a DMP) but sometimes i found myself running out of food or petrol!
Now my thinking is still use a DMP, but do it myself, and up my expenses higher, so i dont run out, and at the same time if i dont spend so much some months, some of that extra spare cash can be squirreled away towards a full and final discounted offers at some point in the future.
In fact today , i asked a creditor how much discount if i settled today, i was pleasantly surprised, and they didnt ask where the money is coming from.
plus setting £50 a month away for emergency fund is fine if you need a new washing machine, fridge etc, but at some point if you run an old car it will need replaced, especially if your DMP will run for a few yrs, so you need to set at least £100 or more away for a replacement car, and that is something i will be incorporating into my new DMP plan. cos ,putting £25 away a month for replacement old car is just far far too low. especially if you think it will fail an MOT very badly.

Rob5342

A DMP is certainly what turned things around for me. I ran up credit card debts of £42k over about ten years. I came up with various budgets and plans I thought I would be able to stick to and sort things out, but I was never able to  stick to them and just ended up borrowing more. Starting the DMP made a real impact as it removed my lines of credit and I was forced to stick to the budget, and things turned round overnight. Just over two years later and that £42k has reduced to only £2.5k that's actually enforceable.

If you try and tackle it without a DMP then my concern would be whether it would actually work out in practice. Things can look achievable on paper but when it comes to doing it it you have a rate that goes up and an extra expense that you jiggle things around for as a "one off", and before you know it it's a year later and you've got nowhere and are worse off. Maybe you can turn things around and actually achieve it, but I know that for me it needed a DMP to force me to do it.

stu12345_2

Rob5342 said:

A DMP is certainly what turned things around for me. I ran up credit card debts of £42k over about ten years. I came up with various budgets and plans I thought I would be able to stick to and sort things out, but I was never able to  stick to them and just ended up borrowing more. Starting the DMP made a real impact as it removed my lines of credit and I was forced to stick to the budget, and things turned round overnight. Just over two years later and that £42k has reduced to only £2.5k that's actually enforceable.

If you try and tackle it without a DMP then my concern would be whether it would actually work out in practice. Things can look achievable on paper but when it comes to doing it it you have a rate that goes up and an extra expense that you jiggle things around for as a "one off", and before you know it it's a year later and you've got nowhere and are worse off. Maybe you can turn things around and actually achieve it, but I know that for me it needed a DMP to force me to do it.

I found the biggest farce especially in general finance websites is " pay off debts, as fast as you can, in particular ,use a interest free credit card or get a very low interest rate loan",
please explain how you do that if interest is what is causing the balance to go down mega slowly???? when you make the payments and the bank or credit card says, sorry you credit score is now too low, to qualify!
 My debts could have probably went away yrs ago, without the need of a DMP, if interest charges had been stopped.
its folk that are suffering on min payments, then interest taking most of the payments, then causing a low credit score that you dont qualify for a interest free card or a very low interest rate bank loan.
these websites are patronising imo.

TheAble

stu12345_2 said:

Rob5342 said:

A DMP is certainly what turned things around for me. I ran up credit card debts of £42k over about ten years. I came up with various budgets and plans I thought I would be able to stick to and sort things out, but I was never able to  stick to them and just ended up borrowing more. Starting the DMP made a real impact as it removed my lines of credit and I was forced to stick to the budget, and things turned round overnight. Just over two years later and that £42k has reduced to only £2.5k that's actually enforceable.

If you try and tackle it without a DMP then my concern would be whether it would actually work out in practice. Things can look achievable on paper but when it comes to doing it it you have a rate that goes up and an extra expense that you jiggle things around for as a "one off", and before you know it it's a year later and you've got nowhere and are worse off. Maybe you can turn things around and actually achieve it, but I know that for me it needed a DMP to force me to do it.

I found the biggest farce especially in general finance websites is " pay off debts, as fast as you can, in particular ,use a interest free credit card or get a very low interest rate loan",
please explain how you do that if interest is what is causing the balance to go down mega slowly???? when you make the payments and the bank or credit card says, sorry you credit score is now too low, to qualify!
 My debts could have probably went away yrs ago, without the need of a DMP, if interest charges had been stopped.
its folk that are suffering on min payments, then interest taking most of the payments, then causing a low credit score that you dont qualify for a interest free card or a very low interest rate bank loan.
these websites are patronising imo.

Too often it's the availability of cheap credit which enables the borrower to keep accumulating debt. One 0% card after another and before you know it it's £50k and kaput. A single credit card with a 50% interest rate and you wouldn't have the problem as the high interest rate would deter the borrowing.

@CurlyTop11 - unfortunately I think you may be too far down the road to correct this without some sort of help. There's so little slack in your budget, then you have Christmas, this MOT and the stag do around the corner that you're probably close to defaulting in any case. Others are more knowledgeable about DMPs and the like but I think you may need to consider something of the sort.

Martico

I agree with @TheAble - there's little in the way of tweaks in an already tight-looking budget. And with the big Fluid interest rate cost coming soon, something like a DMP may be inevitable. If you can earn more on the side / get a good price for your car / sell some other stuff then you may be able to inch your way out.
I'd advise checking what your min payments are for the Barclaycard - 150 is quite a bit over 3% (which I believe is often their minimum) and there's no point paying £40 over the min on a card with 15 months still interest-free when you have other cards charging interest