DMP Interest and Charges

debtermined

So all of the advice on here is to allow CCs, loans and other forms of credit to default before entering into a DMP. I get this is because the defaults will fall off credit report sooner than arrangement to pay markers would… 

My concern is that if I stop making minimum payments on current debts and wait for them to default, the debt is simply going to increase with monthly interest and missed payment charges which seems like madness? 

Currently with the information I’ve submitted to StepChange my debts are totalling £28,265. If I was to wait for my debts to default before actually starting the DMP this could quite easily balloon to £40,000 or more. 

Others have said that although there’s no guarantee of it, some creditors will stop interest and charges once a DMP is started. But would they also backdate this to wipe interest which accrued in the period between stopping minimum payments and defaulting? 

My debts below: 
Monzo personal loan - £13,000 (including full interest owed)
HSBC CC - £4000 (29.9%)
Tesco CC - £2765 (0% promotional but 24.9% if payments missed)
Barclaycard CC - £5850 (0% promotional but 25.1% if payments missed) 
NatWest CC £2650 (26.4%)

Income: £2100 average take home PCM. 

Priority outgoings: £1500 PCM for rent and utilities. 

NB: Total debts not as large as I indicated in previous post after doing all calculations but still absolutely horrendous. 

kimwp

Once you enter the dmp, you can start saving for full and final offers to settle the debt. Debt collection agencies buy the debts for "pennies in the pound", so they will still make money even if they get a quarter of the debt back from you.

Work out your dmp payment based on reasonable expenditure, then you can cut back to save up.

If you share your SOA here (link in my signature), we can advise on your figures. NB stepchange will push for you to start payments soon, so if your accounts haven't yet defaulted, it would be best to come off their books until everything is defaulted.

fatbelly

The default process should take 3-6 months so even a high interest product won't add anywhere near what you suggest. If it takes longer, yes, you should complain and point them to the guidance

PoorSouthernGirl

debtermined said:

So all of the advice on here is to allow CCs, loans and other forms of credit to default before entering into a DMP. I get this is because the defaults will fall off credit report sooner than arrangement to pay markers would… 

My concern is that if I stop making minimum payments on current debts and wait for them to default, the debt is simply going to increase with monthly interest and missed payment charges which seems like madness? 

Currently with the information I’ve submitted to StepChange my debts are totalling £28,265. If I was to wait for my debts to default before actually starting the DMP this could quite easily balloon to £40,000 or more. 

Others have said that although there’s no guarantee of it, some creditors will stop interest and charges once a DMP is started. But would they also backdate this to wipe interest which accrued in the period between stopping minimum payments and defaulting? 

My debts below: 
Monzo personal loan - £13,000 (including full interest owed)
HSBC CC - £4000 (29.9%)
Tesco CC - £2765 (0% promotional but 24.9% if payments missed)
Barclaycard CC - £5850 (0% promotional but 25.1% if payments missed) 
NatWest CC £2650 (26.4%)

Income: £2100 average take home PCM. 

Priority outgoings: £1500 PCM for rent and utilities. 

NB: Total debts not as large as I indicated in previous post after doing all calculations but still absolutely horrendous. 

Just wanted to say, I had exactly the same worries and thoughts as you. 

I suffer really badly with anxiety and depression so the thought of not paying, waiting for defaults and extending my total debt (due to interest and charges) was not something my mind and mentality could cope with even though it is sound advice on this forum and I totally understand the benefits of it.

I’ve gambled and used PayPlan from the start without any missed payments before hand, and all creditors have stopped interest and charges so I have seen my balances coming down in the last couple months rather than increase. 

One hasn’t stopped the interest, but accepted the payment proposal, and when I spoke to them they have said it should be refunded once their system has been updated with the payment arrangement information. 

If it is not I will expect a default (as I won’t be meeting payment expectations) and then they should stop anyway. 

As for the default side of things, if any don’t default and mark me as A/P, I will attempt complaints and failing that further down the line then stop paying to encourage them when I feel more confident and of a more sound mind. 

It’s all very scary to start with, but I have had no calls, just standard letters and feel relieved I am acting on something I probably should have years ago.

Superhoopza

To balance this out though and people please feel free to jump in, but we are seeing most companies take around 5-6 months to default, so with high interest then yes that can add thousands. Others take long to default, not sure on the guidelines here but I presume it's discretionary whether to default you so the balances could grow.

Also F&F offers from my reading here can be anywhere between 30-70% generally so you'd need to do the maths.

Overall though, if you can't afford the repayments then you have little choice. Defaulting is still better than having AP markers on your account.