StepChange DMP advice

gempix

Hi,

I’ve been through the StepChange debt/budget tool and they’ve recommended a DMP. 

For info, approx 30k of debt (across several credit cards and personal loan), income of £2241 pm and household/personal outgoings of £1283. StepChange have recommended I pay a set sum of £1138 pm. This would clear my debt in 2 years and 4 months. Currently, I am making the minimum monthly payments but I am left with very little each month so no hope of increasing payments and actually reducing the debt. 

I have been reading up on DMPs on the forum and I see the overwhelming advice is to stop paying and get defaults first. I really want to get this right so is this definitely the right approach in my case? I’m not too concerned about my credit file - I obviously don’t need any more credit lines available to me, mortgage fixed rate is up in 3 years and I understand if I stay with the same lender it shouldn’t be an issue. 

If I choose to stop paying, do I contact the lenders and inform them or just go dark and let them follow their processes? 

I also saw mentioned about setting up another bank account - I currently have a Monzo account which has a personal loan connected to it, and my salary/DDs are all in there. Is this also a necessary step? 

Thanks in advance for any advice - I know this has been covered in depth on here but I just want to be sure I’m doing the right thing. 

gempix

I should add that I’m in Northern Ireland. 

fatbelly

Your understanding of a dmp seems good.

It is recommended that you do not bank where you have debts because of the right of set-off, where the lender just helps themselves to your income. It doesn't happen very often but it's a case of prevention being better than cure.

Also it helps to stay in control of the process if the creditors do not have detailed access to your income details.

Now is a good chance to explore which banks will give you an incentive to sign up.

My only reservation about a dmp for you is that you do have a lot of surplus income and so if you can meet the minimum payments and look at ways of reducing interest you may not need to default

How do you feel about posting a soa?

https://www.lemonfool.co.uk/financecalculators/soa.php

elsien

I am slightly confused by stepchange, recommending the larger repayment while you say that you have very little left after the minimum monthly payments. 

Are you working to the same budget?

fatbelly

Presumably the contractual payments on 30k debt are higher than that? It does look a bit odd, which is why I suggested the soa

gempix

SOA is below. You're right, the figures I mentioned above were off - that's what I get for doing this in the middle of the night.

I hadn't adjusted for a couple of debt payments my partner contributes to, but they're solely in my name so I've listed the whole payments with the rest of my unsecured debt. I also increased some other categories that I currently use credit to pay for, which obviously needs to stop.

I just want to be sure that a DMP is the right course of action for my situation before I make any big decisions.


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

Household Information[/b]

Number of adults in household........... 2

Number of children in household......... 2

Number of cars owned.................... 1[b]

Monthly Income Details[/b]

Monthly income after tax................ 2421.48

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

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

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

Total monthly income.................... 2421.48[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 307.8

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

Rent.................................... 0

Management charge (leasehold property).. 0

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

Electricity............................. 45.15

Gas..................................... 84

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

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

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

Mobile phone............................ 62

TV Licence.............................. 4.64

Satellite/Cable TV...................... 12.25

Internet Services....................... 15.4

Groceries etc. ......................... 260

Clothing................................ 30

Petrol/diesel........................... 35

Road tax................................ 0.88

Car Insurance........................... 8.71

Car maintenance (including MOT)......... 9.63

Car parking............................. 5

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

Childcare/nursery....................... 167.45

Other child related expenses............ 54.65

Medical (prescriptions, dentist etc).... 20

Pet insurance/vet bills................. 11.24

Buildings insurance..................... 15.3

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

Life assurance ......................... 64.4

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

Presents (birthday, christmas etc)...... 20

Haircuts................................ 25

Entertainment........................... 37

Holiday................................. 0

Emergency fund.......................... 20

Rates................................... 53.37

Ground Rent............................. 1.2

Tesco................................... 2.8

Spotify................................. 6.3

Prime................................... 3.15

Dreams.................................. 47.06[b]

Total monthly expenses.................. 1429.38[/b]

[b]

Assets[/b]

Cash.................................... 0

House value (Gross)..................... 240000

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

Car(s).................................. 5000

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

Total Assets............................ 245000[/b]

[b]

Secured & HP Debts[/b]

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

Mortgage...................... 207454...(307.8)....2.89[b]

Total secured & HP debts...... 207454....-.........-   [/b]

[b]Unsecured Debts[/b]

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

CC1........................9963.98...431.2.....30.78

CC1......................8192.42...108.6.....21.66

CC2.......................813.71....25........0

Payment plan (usually shared with partner).......................1339.84...62........0
Loan  (usually shared with partner).....................4124.05...317.2.....0

Catalogue......................425.48....15........0

Catalogue...........................2033.52...108.......0

Credit.........................3173.77...108.......0[b]

Total unsecured debts..........30066.77..1175......-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 2,421.48

Expenses (including HP & secured debts). 1,429.38

Available for debt repayments........... 992.1

Monthly UNsecured debt repayments....... 1,175[b]

Amount short for making debt repayments. -182.9[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 245,000

Total HP & Secured debt................. -207,454

Total Unsecured debt.................... -30,066.77[b]

Net Assets.............................. 7,479.23[/b]

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

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

gwynlas

I am another reader who is confused by Stephange recommending such high repayments though these give a short timescale, did you request this? Looking at your SOA one thing that stands out is your emergency fund saving of only £20 ideally you should have a fund of 3 times salary. I would be tempted to renegociate payments to half those set and build up savngs in order to not be tempted by further buying on credit.

gempix

I didn’t request it, I went through their online tools and that was the figure they gave me. It’s based on whatever’s leftover after my personal expenses so if I upped the emergency fund to say, £500, the monthly payment would reduce by the same amount. Is that not how it usually works? 

Grumpelstiltskin

I'm a bit confused about what the total household income is and what exactly your partner pays.

Also 2 children and no child benefit?

gempix

We try to split the household bills proportionally based on our salaries. My partner’s income takes us above the threshold for paying tax on child benefit so we don’t claim it as we’d just have to pay it all back to HMRC. 

katsu

gempix said:

We try to split the household bills proportionally based on our salaries. My partner’s income takes us above the threshold for paying tax on child benefit so we don’t claim it as we’d just have to pay it all back to HMRC. 

Can you update the SOA to say what percentage of the bills you are paying as I can't tell what the real costs are to offer you ideas. 

Eg I'm assuming the mortgage and food are higher but that is just your mobile phone costs alone? 

I think that info will help you get advice.