Repayments are greater than income - DMP?

Kauto5

Sorry, just one more question: 

If my creditors agree to freeze interest then that would be great of course. I understand that with credit cards that's fairly simple, they don't add any more interest. But how does that work with loans? 

I'm working out my total amount owed to include all the interest on loans if paid as normal. But if they freeze interest, would that mean just the principal is owed?

Rob5342

Three months is a very rough guideline but it depends on the creditor. Barclaycard were brilliant and defaulted me within a few months but Virgin were terrible and dragged it out for 18 months.

Its up to you how you handle it, if you manage the dmp yourself then you can just start up the payments as each debt defaults. Debt collectors sound scary but they are nothing to worry about really. The first contact is normally a quite friendly sounding letter saying they want to help you pay the debt off, and you can usually just go on their website and set uo a payment plan and then they are happy. If you ignore them then they gradually turn up the threat level. 

Kauto5

That's very reassuring, thank you! 

So rather than wait for all my debts to default before entering into a DMP via step change (I have 12 separate creditors in total, or 13 if my overdraft counts), I can set up a repayment plan with each one as and when they default? 

If I do it myself this way, when setting up a payment plan is that when I'd request that they freeze the interest? 

I'm going to complete a SOA tomorrow to help me.

RAS

Not quite.

One of the reasons that people on MSE recommend that you wait for defaults is because your credit record will be repaired faster. 

The other is that once the default is registered, creditors stop adding fees or interest to the debt.

They may well or may not do the same if you go immediately in to a DMP through a debt charity, but occasionally we've seen people getting towards the end of a DMP with a debt that hasn't been defaulted and the creditor starts charging interest again, because the monthly payment is now equal or higher than the minimum payment. 

So defaults help you reduce the sum owed even if in the short term it increases prior to the default. And you should get offers of reduced settlement further down the line.

Kauto5

I'm concerned that having looked into it all further, two of my loans are with credit unions:

Castle Community Bank
Transerve UK

They are listed as not for profit, does this mean they are any different to my other loans with the likes of Lendable and Hastings? I'm worried that they won't default and will instead go straight to CCJ. On the Transave website it says:

"We’ll attempt to contact you as soon as we see payments are being missed to chat through your options. If we’re unable to reach you, we’ll have to consider bringing legal proceedings as a last resort. We’ll notify you well in advance of any legal proceedings starting though and will always aim to work with you to find an alternative solution where possible"

No mention of defaults, I feel I'm stuck

Grumpelstiltskin

Credit Unions can be the most aggressive of creditors, they can go for CCJs but at the moment cancel payments.

Could be as you have so many creditors you can go for unaffordable lending with at least some of them.

If a creditor does think about going for a CCJ they don't just appear out of thin air there is a legal procedure which gives you time to sort something out before it happens.

You will be advised not to speak to any creditor and to ignore texts and E Mails as it will be letters you receive by snail mail you have to deal with.

Nothing will  happen quickly so the sooner you stop payments the better.

Get your SOA done include interest rates and the sooner we can see that the sooner we can give you advice.

fatbelly

I would suggest that credit unions are an exception to the general rule. Their loans are not regulated by the Consumer Credit Act and their staff often  less sympathetic.

So I suggest that you prioritise them and try to reach affordable payment plans with them. Then look to do a debt management plan on the others

Castle have minimal info on the process

https://castlecommunitybank.co.uk/financial-support/#debtmanagement

And Transave even less

https://transave.co.uk/faqs/

ManyWays

I agree with @fatbelly, if they go for a CCJ they may even send in High Court Bailiffs. It feels like you are rewarding them for behaving badly, but you have to do what is best for you.

Kauto5

Thank you, all this advice is so greatly appreciated at such a stressful time. 

I will get my SOA finished and uploaded today. 

So contact the two credit unions and try to reach a repayment plan with them. But with the other 10 creditors stop payments immediately? Then wait for them all to default whilst building an emergency fund, then go into a DMP with all 10 separate to the two credit unions?

RAS

Pretty much.

Let's see the SOA so that we can identify anything you've not included. Otherwise there's a risk you make commitments that you can't keep. Better to promise a bit and then be able to increase later than offer and fail to deliver.