Questions about a DMP and £50k in debt

Grumpelstiltskin

You often don't even need to write, you get an account number and you just go  onto their website and set up a standing order ( not direct debit ) for the amount you are going to pay.

BasketballJumper90

Grumpelstiltskin said:

You often don't even need to write, you get an account number and you just go  onto their website and set up a standing order ( not direct debit ) for the amount you are going to pay.

So does the letter I pasted above that has their bank details (which I admittedly snipped off the bottom) not count as that letter? Reading it again it says I just need to pay the arrears for now, not the total amount, so I assume that's still to come?

I guess the key thing is to wait until I get the default on my credit file?

Grumpelstiltskin

Yes wait, don't be in a rush to start paying them. The most important thing at the moment is once you have stopped paying you use as much money as you can to build up an emergency fund, your creditors can wait and remember you are in charge not them.

BasketballJumper90

Alright then, thank you! You're all incredibly patient with those of us asking questions. I really appreciate it!

I think I just struggle because it's such a woolly process, if there was a flowchart/step by step of what to do that'd be ideal. If anyone knows of one then please post it Otherwise I'll be back in touch when the default appears on my credit file to confirm my next action!

misterbarlow

Around 12-13 years ago we came on here for advice while drowing in around 50k of debt due to my wife being out of work a few years, and we started a DMP with stepchange. Found them really helpful!
Was paying out about 1500pm in loans and min payments at the time...
The killer is the CC% on large balances, all the min payments were just covering the interest every month, which stops piling on as soon, when you start a DMP they all farm em out to the DCA's..

We started off at 450pm, then over the years I had annual pay rises but never changed my income with them as most household bills went up, as the smaller ones started clearing we tinkered every year with the budget on their site and dropped it to 400pm, 350 then 300.
We also managed to save a bit and clear all the smaller ones early direct with DCA's which then helps bring down the bigger ones faster.
Stepchange used to moan about this telling us we had to treat everyone equal but we ignored them and nothing ever came of it.

After about 8 years we both had better jobs and it was down to 4-5k and by then our credit was half decent again and we took out a small loan over 3 years and made a load of f&f deals just to get off the DMP, and now thats paid, our credit is back to perfect, we have score of 1000 on clearscore, and have recently remortgaged with no issues.

Its a long, hard road, but worth doing..

thelibrarian11

Would you recommend doing that? Like towards the end when your credit rating has gone up a bit and it's a good interest rate, getting a loan to do the last few F&Fs? It would help to rebuild your credit wouldn't it, if you can afford the payments.

sourcrates

thelibrarian11 said:

Would you recommend doing that? Like towards the end when your credit rating has gone up a bit and it's a good interest rate, getting a loan to do the last few F&Fs? It would help to rebuild your credit wouldn't it, if you can afford the payments.

Taking out further credit to repay existing credit is crazy in the vast majority of cases, the phrase "slave to your lender" is one Dave Ramsey likes to use a lot.

Any form of credit aside from a mortgage is to be discouraged, how do you think wealthy people become wealthy?
They invest their income, they don`t spend it frivolously, they drive £1000 cars, and live frugally.

As long as you are paying debts you will never be rich, pay the debts with your income, and once their gone, that income is all yours again!!.

ManyWays

thelibrarian11 said:

Would you recommend doing that? Like towards the end when your credit rating has gone up a bit and it's a good interest rate, getting a loan to do the last few F&Fs? It would help to rebuild your credit wouldn't it, if you can afford the payments.

No, any loan would be at a horrible rate of interest. Run into problems paying it and the whole debt and bad credit record cycle starts again, just when you were getting close to old problem dropping off your credit record. 

Rob5342

At the end of a dmp you have interest free loans (as they have defaulted) and payments that are whatever you can afford. It would be crazy to turn that into an interest bearing loan with contractual repayment obligations. A much better strategy would be to reduce the amount you ate paying and save the difference imto a fund for making settlement offers. If you get one offer accepted then you can save the repayments you were making for the next offer etc. 

RAS

thelibrarian11 said:

Would you recommend doing that? Like towards the end when your credit rating has gone up a bit and it's a good interest rate, getting a loan to do the last few F&Fs? It would help to rebuild your credit wouldn't it, if you can afford the payments.

On thing to note is that whole debt situation has become much more reasonable in the last decade. It wasn't unusual to find people making low repayments and getting AP markers for decades. The minimum payments on high interest accounts ensured anyone paying them went further into debt the longer they held the account.

These days interest is halted and default issued quite promptly. So your debt is interest free at least. Start putting any extra income into your emergency fund with the aim of getting offers for discounted settlement. That way you'll end up paying a fraction of what you owe.