DMP - HONEST OPINIONS?

Msouza1

Hi all,

I have found myself in a bit of spiral with several missed payments on 3 credit cards and a bank loan. This started earlier this year when leaving a former employer (who decided as a parting gift to only pay me about 25% of my monthly salary) before this I hadn't missed a minimum payment for 3 years. 

Admittedly I had been overspending on these cards but hindsight is a wonderful thing and I have always had issues managing my finance. My debts are totalling around £19,000 and currently with my income set to be the only income in my household due to my wife's maternity leave I have had to seek further advice. 

I have talked to a company who have recommended a DMP (Debt Management Plan) to reduce my payments into one affordable monthly amount. Obviously a DMP would result in multiple defaults on my credit score which I have read last up to 6 years. 

I'm pretty sure that the DMP will be the best way for me to get back on top of this and stop avoiding the issue. But I am worried that when my mortgage is due for renewal in 2028 if these defaults will affect my eligibility to even get a mortgage again? Or am I being dramatic? 

I'm not worried about obtaining credit for other items in the short term as I'm lucky enough to have a vehicle for the next 3 years and don't foresee any major costings in the near future.

Also will the DMP affect my wife's credit score? (we don't have any linked bank accounts and all of these debts are in my name) 

Appreciate your time and any responses 

Marcus 

ManyWays

Which DMP firm have you been talking to, its important to avoid any that charge fees.

Who is your mortgage with, most lenders don't even check your credit score if you only need a new fix.

A DMP will affect your wife's credit score if you have a joint mortgage?

Grumpelstiltskin

OK Number 1 don't rush into anything until you have advice from here and you fully understand what you are letting yourself into.

I hope the company you are talking to won't charge you for the DMP. If they do only 2 words barge and pole.

It is perfectly easy to run a DMP yourself, then you are 100% in control.

Have you read through this thread?
In Debt and Wannabe Debt Free? first Steps to take are here, please read, then ask questions. — MoneySavingExpert Forum

If you can complete a honest SOA format for MSE and copy and paste on here then when we see your full situation we can advise you.

Msouza1

Our mortgage is with Natwest, I will not miss any payments on this at any point. 

The company offering the DMP is PAYPLAN - They charge no commission for their services 

Grumpelstiltskin

Is your mortgage in joint names with your wife?

OK Just don't jump into a DMP yet, you need to stop paying all unsecured debts  and let them default before you even think about a DMP.
Once they have defaulted they disappear from your credit record in 6 years  whether they have been paid back in full or not.
If you start repaying them before they default they don't disappear until 6 years after the final payment has been made.

Msouza1

Ahh interesting, but what do I do if the credit card companies instruct debt agencies/ debt collection? Or is this the point I would initiate the DMP? 

The mortgage is in joint names and as I said isn't due for renewal until April 2028 

Grumpelstiltskin

If your mortgage is in joint names then you are financially linked.

You will be able to renew your mortgage with the company you are with now with no problems.

Don't worry about debt collectors, debt collection moves slowly and that is way down the line.

Msouza1

Thank you so much for your comments! I will most probably move forward with defaulting on these cards to avoid the even longer-term impact on my credit file. However with the loan (with HSBC)  that is from my day-to-day bank current account / main bank account. If I default on the Loan to HSBC is that likely to affect my current account access? Or will it be completely un-connected (E.G. on my internet banking I can see the outstanding loan amount as well as main account and savings account)

Rob5342

Most lenders, and definitely Natwest,  don't do a credit check if you are just switching to a new mortage deal. I have four defaults and switched to a new deal with Santander with no problems at all (two minutes on their website and that was it).

https://www.natwest.com/support-centre/mortgages-and-loans/general/will-i-be-assessedcredit-scored-even-though-im-just-changing-my-mortgage-rate.html

Payplan are ok as they don't charge fees, but like Stepchange they do work in a way that gets as much money as possible out of you and harms your credit record for far longer than necessary. If you do a DMP then it's much better to manage it yourself as you can run it to your own advantage and be far better off in the long run.

Debt collectors are nothing to worry about, no legal action can be taken until you default. Essentially you just ignore all the fuss they make before you default as they can't take any legal action, and then pay what you can and they are happy because it's cheaper for them than taking legal action. While you are waiting you put what you would be paying towards the debts into an emergency fund to cover any future expenses.

Grumpelstiltskin

OK You must get a new basic current account ( with no overdraft ) with a bank that has no connection with HSBC or any other of your creditors.

You must transfer all vital direct debits manually, don't use the bank swop service.

The loan will then just be another unsecured debt you are no longer paying.

Rob5342

Msouza1 said:

Thank you so much for your comments! I will most probably move forward with defaulting on these cards to avoid the even longer-term impact on my credit file. However with the loan (with HSBC)  that is from my day-to-day bank current account / main bank account. If I default on the Loan to HSBC is that likely to affect my current account access? Or will it be completely un-connected (E.G. on my internet banking I can see the outstanding loan amount as well as main account and savings account)

As Grumpelstiltskin says it would be good if you could post an SOA, then we can advise on your whole situation. Don't start anything until you understand all the implications.

Banks have the right of set off, which means if you owe them money then they are entitled to take money from any other accounts you hold with them. I'm not sure how often it actually happens, but to be on the safe side it's good to keep your money in accounts with banks that are not in the same banking group as any banks you have debts with. If you want to see everything in one place then lots of banks let you add other accounts with open banking.