DMP or try to attack debt myself

dave808

Looking for some advice or comments from those that might have been in similar a situation.

Have posted this on Reddit but was told this is the where the knowledge is at. 

I have had debts in some form for around 5 years. I was making solid progress to clear these in 2022 however got a bit reckless in spending in 2023/24 and pushed these up towards £18k. Throughout this time was moving the balance around 0% cards. I was earning £50k so felt was capable to tackle on my own

Unfortunately last year I made a number of silly and reckless decisions. Quitting my job with no real plan and moving out of my parents house as well as getting into a toxic long distance relationship massively increasing expenditure. This year I suffered heavily with depression and addiction unable to hold down a job which has had the largest impact and has left my debts now sitting around £40k, unfortunately I was just trying to was just trying to survive during this time living one day at a time but luckily I am out of that hole now and can start sorting my life and debts out. I am back into employment earning £60k (potential bonuses down the line but not counting at the minute) and have been in contact with StepChange who are suggesting a DMP to tackle this. Their budgeting tool, as well as SOA tool estimating I have around £1k a month available for these debts, I think would ideally like to be closer to 900 to make sure I am not stretching myself.

I am aware of the gravity of this situation and the need for action now but part of me, probably the ego speaking, wants to tackle this myself and not have the impact of the DMP on my file down the line, I dont know if this is realistic of I am being naive of the situation I am in right now.

To break down the balances - 11k to parents who have agreed 0% repayments over a 2-3 year period (very luck and grateful that they have agreed to write off 10k that I owed them on top of this) and 10k being on 0% cards with 2 years remaining on the promotional period. Leaving about 10k on high interest rate and 6k on shorter 0% periods. If I tried to do myself I would be first attacking the high interest rate and short 0% debt whilst keeping a monthly payment to my parents of around £300-350.

I am also currently on Breathing Space until the end of the month.

Would be great to also understand how a StepChange DMP would compare to running your own DMP given I do have a fair few creditors and also how much potentially could be saved with settlement offers down the line.

Appreciate any advice on this. Thanks

SOA below, income estimated as not had first pay check but lower range put in:

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

Household Information[/b]

Number of adults in household........... 1

Number of children in household......... 0

Number of cars owned.................... 0[b]

Monthly Income Details[/b]

Monthly income after tax................ 3400

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

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

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

Total monthly income.................... 3400[/b][b]

Monthly Expense Details[/b]

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

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

Rent.................................... 1075

Management charge (leasehold property).. 0

Council tax............................. 75

Electricity............................. 30

Gas..................................... 30

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

Water rates............................. 35

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

Mobile phone............................ 13

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

Satellite/Cable TV...................... 0

Internet Services....................... 16

Groceries etc. ......................... 350

Clothing................................ 100

Petrol/diesel........................... 0

Road tax................................ 0

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

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

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

Other travel............................ 200

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

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

Medical (prescriptions, dentist etc).... 80

Pet insurance/vet bills................. 0

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

Contents insurance...................... 19

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

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

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

Haircuts................................ 70

Entertainment........................... 150

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

Emergency fund.......................... 0

Toiletries.............................. 25

Vape Products........................... 40

Laundry................................. 10

Alcohol ................................ 50[b]

Total monthly expenses.................. 2388[/b]

[b]

Assets[/b]

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

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

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

Car(s).................................. 0

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

Total Assets............................ 0[/b]

[b]

No Secured nor Hire Purchase Debts[/b]

[b]Unsecured Debts[/b]

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

Santander Overdraft............991.......0.........39

Santander CC...................7301......73........0

MBNA CC........................2224......49........0

Parents Loan...................11000.....350.......0

Tesco Loan.....................4082......240.......9.47

Amex...........................1323......26.47.....35

Monzo Overdraft................2700......39........39

Monzo Loan.....................487.77....50........32

Monzo Flex Store Card..........1544......94........Var

Virgin.........................7372......72........0[b]

Total unsecured debts..........39024.77..993.47....-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 3,400

Expenses (including HP & secured debts). 2,388

Available for debt repayments........... 1,012

Monthly UNsecured debt repayments....... 993.47[b]

Amount left after debt repayments....... 18.53[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 0

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

Total Unsecured debt.................... -39,024.77[b]

Net Assets.............................. -39,024.77[/b]

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

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

fatbelly

Sorry we've been slow to comment. I suspect this is because you are one of those cases that is borderline for needing a dmp.

On your figures you can meet the debt repayments, although there is not a lot left over, and the figures for some things seem generous.

On the other hand that's a fair bit of debt and your credit file is going to look poor for the next few years. A dmp would be one way of killing the interest.

See what the others think. If it were me I think I would cut back on a few things and continue to pay the contractual amounts, but aim to generate say £200 per month to overpay the highest apr debts

Grumpelstiltskin

You need a complete rethink on your way of life, so you are happy to put vapes and alcohol before debt repayment?

£350 for food for one person is way too much, do you cook from scratch or do you buy takeaways and ready meals? Do you buy branded items or supermarket own brands?

As fatbelly says you have enough to pay your debts if you are determined to clear them.

Where did all the money go? Things you can sell?

sourcrates

You have a reasonable income, but a lot of debt, yes I agree, a borderline case for a DMP possibly.

I disagree on some points raised, I don`t believe in skimping on the food bill too much, I`m a divorced single bloke, and I spend way more than £350 a month on food, food costs have quadrupled in the last year or two, some of the other stuff you spend money on though can be reduced.

Do you really spend £70 per month on haircuts ?

Yes booze/entertainment and those detestable electronic USB sticks can be cut back on or got rid of altogether.

£310 a month, or £3720 a year there that could go towards your debts.

This debt needs your best attention otherwise it will get out of control.

Rob5342

Id say it was borderline too. If you make some cutbacks you could start to make a dent in it, the danger is thst it could get out of control again when the 0% deals come to an end.

£350 a month for one person seems a lot for food to me. Looking at our Monzo history we spend about £450 at Lidl each month for three adults. £70 for haircuts seems way to much, we pay £35 for the three of us every 6 weeks to a woman that comes to our house

Stepchange vs managing a dmp ourself is trading convenience for flexibility really, it won't make any difference to how your creditors behave. Stepchange have a very rigid approach and if you are happy doing things that way then they can save you a small amount of administration, if you want to deviate from their approach they just make everything more difficult. Some people start off with them and then manage it themselves when they are comfortable with the process. 

dave808

Hi all, 

Thanks for the comments so far, agree it does seem on the edge of DMP so just trying to weigh that up. I do have varying 0% lengths and my current credit score is not great so getting additional ones when they run out may be a little harder than it has been.

Can you leave StepChanges DMP process then after a while once things are running, this would definitely seem a good way to arrange some settlements down the line.

In regards to food, I do agree it seems like allot, but I am very active and for better or worse have a quick metabolism so do need to eat quite a bit to keep my energy up. I have budgeted in one takeaway month (£15 approx) the rest is cooked at home, very very rarely eat any kind of ready meal. I shop at Aldi for the big weekly shop, food prices are high and being in London are higher as well.

Haircuts I will look into, spend £35 every 3 weeks normally so that might be a tad high saying 70 a month probably closer to 50. Again being in london, working 5 days a week in the office in the city, they are expensive. Working often with clients I can't be waiting 6 weeks between haircuts.

As a heavy ex smoker the vaping is something ive been trying to cut for many years but currently im really trying to put my efforts into keeping clean from substance use right now and I am only very recently clean from all that, long term yes I want to rid the vapes but this is a work in progress, currently not drinking any alcohol so can take that off.

I will try to cut back on entertainment but 37 a week to even be able to do small things with friends in london does not go very far. As an example within this amount is tennis once a week and that ends up being 40 a month and cycling probably adds another 20. Physical activity is the biggest net benefit to my mental health and recovery so don't feel like its in my best interest to cut these.

Unfortunately the money did not go to major possessions so I dont have anything to sell, maybe a few items of a a couple of hundred at maximum which I will get rid of ASAP but overall was just living well beyond my means.

I do completely agree in the need for a lifestyle change and have been already working hard on that and have had a very good last 3/4 weeks keeping to a very tight budget which I will continue to fine tune and reduce where possible and do take on board the comments in here.

Rob5342

You can leave Stepchange whenever you like, I started off with them and then moved to managing mine myself. Managing a DMP yourself is a doddle really, but it can seem very overwhelming when you first start out and aren't familiar with the process. It you do decide to go for a DMP then read the comments on here regarding letting your accounts default before you embark on anything. 

dankemp

dave808 said:

Hi all, 

Thanks for the comments so far, agree it does seem on the edge of DMP so just trying to weigh that up. I do have varying 0% lengths and my current credit score is not great so getting additional ones when they run out may be a little harder than it has been.

Can you leave StepChanges DMP process then after a while once things are running, this would definitely seem a good way to arrange some settlements down the line.

In regards to food, I do agree it seems like allot, but I am very active and for better or worse have a quick metabolism so do need to eat quite a bit to keep my energy up. I have budgeted in one takeaway month (£15 approx) the rest is cooked at home, very very rarely eat any kind of ready meal. I shop at Aldi for the big weekly shop, food prices are high and being in London are higher as well.

Haircuts I will look into, spend £35 every 3 weeks normally so that might be a tad high saying 70 a month probably closer to 50. Again being in london, working 5 days a week in the office in the city, they are expensive. Working often with clients I can't be waiting 6 weeks between haircuts.

As a heavy ex smoker the vaping is something ive been trying to cut for many years but currently im really trying to put my efforts into keeping clean from substance use right now and I am only very recently clean from all that, long term yes I want to rid the vapes but this is a work in progress, currently not drinking any alcohol so can take that off.

I will try to cut back on entertainment but 37 a week to even be able to do small things with friends in london does not go very far. As an example within this amount is tennis once a week and that ends up being 40 a month and cycling probably adds another 20. Physical activity is the biggest net benefit to my mental health and recovery so don't feel like its in my best interest to cut these.

Unfortunately the money did not go to major possessions so I dont have anything to sell, maybe a few items of a a couple of hundred at maximum which I will get rid of ASAP but overall was just living well beyond my means.

I do completely agree in the need for a lifestyle change and have been already working hard on that and have had a very good last 3/4 weeks keeping to a very tight budget which I will continue to fine tune and reduce where possible and do take on board the comments in here.

There is no judgement here, just commenting on what you have said so far.

As others have said you could eliminate this debt if you are determined to do so.

You do not say what the £12k for parents was for?  If it was a previous debt then it suggests you have a problem because getting this deep into debt when you already owe £12k may not just be poor debt management but something more serious like a gambling problem.

For me it comes down to one thing, do you ever plan to get a mortgage, car or other long term finance? 

If the answer is yes then the following is the way forward

You could eliminate the debts with higher interest first.

Ask your parents for a holiday on their loan if possible

Your goal is to repair your zero percent debt expires to a point where a new lender will at least take on enough for the debt that is expiring but ideally enough to take on one of the smaller debts too, thus eliminating interest.

For example if MBNA was due to expire you might ask a new lender for 2224+1544+1323 for MBNA, Flex Store Card and Amex.  Then destroy those high interest cares

The Monzo loan would be a good quick win, pay it off in a lump sum and cancel the facility.

The Santander overdraft seems pointless, it just leaves you paying 39.9% a year on 1000 and you are mistaken if you think the monthly cost is 0, the annual cost is £395 and the monthly payment £33

Making the minimum payment of:the greater of 3% of balance or £33.

---

This £991 debt will take 5 years and 9 months and cost £1,263 in interest but that is you pay off money each month and you don't spend it again otherwise it is costing your £400 a year perpetually

[b]Unsecured Debts[/b]

Description                        Debt    Monthly    APR
Santander Overdraft          991          0         39%
Monzo Overdraft              2700      39           39%
Monzo Flex Store Card    1544      94          Var?????
Amex                                1323      27          35%
Monzo Loan                       487       50          32%
Tesco Loan                      4082      240       9.47%

MBNA CC                       2224        49            0
Santander CC                 7301        73            0
Virgin                              7372         72           0

Parents Loan                11000       350           0

You have plenty of scope to cut your outgoings, go to Tesco and buy a hair clipper, £18 and no more haircuts.

ESSENTIAL SPENDING

Council tax.........................................................75
Electricity...........................................................30 Seems low £40 a month
Gas...................................................................30 Seems low £40 a month
Water rates........................................................35   Seems high £20 a month
Mobile phone...................................................13   Reduce to £3 or $5 Lebara
Internet Services........................................... 16
Groceries etc. ..............................................350    Reduce to £200 no more Deliveroo or energy excuses
Other travel....................................................200
Medical (prescriptions, dentist etc)............80
Contents insurance.......................................19

Unnecessary  Spending

Entertainment...............................................150 Eliminate totally not a necessary spend - £150
Clothing..........................................................100 Eliminate totally not a necessary spend - £250  
Alcohol ............................................................50 Eliminate until debt paid off - good encouragement £300
Haircuts...........................................................70 Eliminate with hair clipper - £370
Vape Products...............................................40 See GP and get off vapes - £410
Toiletries.........................................................25 Include in groceries and still manage them at £200 - £435
Laundry..........................................................10 Include in groceries and still manage them at £200 - £465
Presents (birthday, christmas etc).............20 Eliminate totally not a necessary spend - £455

Plus £150 saving on food - £605

Less £20 for energy  - £585

So £585 a month potential savings

Plus any payment holiday you can get from your parents

This really comes down to how serious you are about cutting back, I do not have any of the spending I suggest is unnecessary

If you make these cuts you have the potential to repair your credit score in the order of debt shown above, then pay off the the loans by putting things like food spending on the zero percent cards and taking that £200 to overpay the loans.

The less debt they see the better your score, there is a theory that not cancelling the debt facilities that you reduce to zero will give you a better credit score because as a percentage of total debt available you have capacity.  I am not sure about that.

dave808

Thanks for your detailed reply dankemp.

The 11k from my parents was debt consolidation loan given last year, a debt holiday is not an option here. As I previously mentioned I have been struggling with substance addiction, allot of this new debt unfortunately comes from that, I am now clean and moving on from that dark chapter.

Agree monzo loan was on the radar for my first paycheck to close out.

All energy and water figures are correct and on smart meters.

I don’t think I pay zero on an overdraft, left that figure out accidentally, again I agree it falls under the high interest credit that needs to be tackled first and have highlighted 10k of these high interest creditors that I would be aiming to pay off first if I am tackling this myself.

As also mentioned before I work in a client facing role in financial services, where unfortunately appearances are heavily judged and do have an impact hence why I have the need for haircuts and to also have some spending on clothes. However will look at reducing those as much as possible. 

200 a month for all groceries including toiletries and laundry seems very tight to me. Sure I will cut the one deliveroo budgeted a month out but as I have said being active (exercise 4/5 days per week) does require me to consume more food than the average individual. You burn more calories, you need to consume more and also need to ensure I am eating the correct foods to aid recovery. I am of course open to analysing my food spend to try and work out if can optimise the spending and be smarter with purchases to get that figure down as low as possible, but I already cook from scratch, don’t eat ready meals and shop at Aldi (non-branded products only). I think I can get this down to 300 including laundry and toiletries, which I think for London is extremely good.

Im not sure if your saw my previous comment around entertainment spending so will add back in.

As an example within this amount is tennis once a week and that ends up being 40 a month and cycling probably adds another 20. Physical activity is the biggest net benefit to my mental health and recovery from substance use so don't feel like it is in my best interest to cut these. I understand there is a need for drastic lifestyle change, and I am ready and open to do this however as someone with history of poor mental health and addiction I am conscious of ensuring I am engaging in activities outside of work that are helping these two areas so I don't end up back in the same place.

Not sure this is going to go down very well but I am also having therapy which I forgot to include in the budget, apologies. This is to deal long standing mental health problems, previous trauma and addiction which at this time I need support with and is in my eyes and the eyes of people closest to me an absolutely necessary spend right now. My parents are currently paying for a few sessions but I think there will be some of that cost returning to me once my first paycheck is in.

Attached a revised SOA.

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

Household Information[/b]

Number of adults in household........... 1

Number of children in household......... 0

Number of cars owned.................... 0[b]

Monthly Income Details[/b]

Monthly income after tax................ 3433

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

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

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

Total monthly income.................... 3433[/b][b]

Monthly Expense Details[/b]

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

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

Rent.................................... 1075

Management charge (leasehold property).. 0

Council tax............................. 75

Electricity............................. 30

Gas..................................... 30

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

Water rates............................. 32

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

Mobile phone............................ 13

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

Satellite/Cable TV...................... 0

Internet Services....................... 16

Groceries etc. ......................... 300

Clothing................................ 75

Petrol/diesel........................... 0

Road tax................................ 0

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

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

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

Other travel............................ 200

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

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

Medical (prescriptions, dentist etc).... 80

Pet insurance/vet bills................. 0

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

Contents insurance...................... 19

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

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

Presents (birthday, christmas etc)...... 10

Haircuts................................ 50

Entertainment........................... 150

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

Emergency fund.......................... 0

(Unnamed monthly expense)............... 0

Therapy................................. 140

Vape Products........................... 40

Laundry................................. 0

Alcohol ................................ 0[b]

Total monthly expenses.................. 2335[/b]

[b]

Assets[/b]

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

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

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

Car(s).................................. 0

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

Total Assets............................ 0[/b]

[b]

No Secured nor Hire Purchase Debts[/b]

[b]Unsecured Debts[/b]

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

Santander Overdraft............991.......33........39

Santander CC...................7301......73........0

MBNA CC........................2224......49........29

Parents Loan...................11000.....350.......0

Tesco Loan.....................4082......240.......9.47

Amex...........................1323......26.47.....35

Monzo Overdraft................2700......39........39

Monzo Loan.....................487.77....50........32

Monzo Flex Store Card..........1544......94........NaN

Virgin.........................7372......72........0[b]

Total unsecured debts..........39024.77..1026.47...-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 3,433

Expenses (including HP & secured debts). 2,335

Available for debt repayments........... 1,098

Monthly UNsecured debt repayments....... 1,026.47[b]

Amount left after debt repayments....... 71.53[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 0

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

Total Unsecured debt.................... -39,024.77[b]

Net Assets.............................. -39,024.77[/b]

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

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