Disability & Unsecured Borrowing

Altior

https://forums.moneysavingexpert.com/discussion/comment/82086890#Comment_82086890

Thanks for the input.

I've toyed with the variables as you may imagine, and to qualify for max UC seems the best strategy for me.

I do have an overriding personal principle that I took out the debt, and it should be paid back. Not due to some altruistic view of lenders, but personal and professional pride. That is specific to me and my personality, I don't expect everyone else to feel the same. But it's not the overwhelming factor within my practical scenario.

If, say, I retained the money, I would get UC of £50 per month. Plus whatever the savings yield. Added together, they would still be less than my priority bill commitments, thus no scope to pay anything into a DMP, and the hole getting slightly bigger as every month passes.

Full UC + CT Support is worth about £300 per month. That would then give me headroom to contribute to an hypothetical DMP. And there is a chance that I will get refreshed 0% BT offers, and be able to roll the debt forward, and be able to avoid a DMP altogether.

Altior

The prudent allocation is tricky. If it does end up DMP, the fewer creditors the better, but also in mind is avoiding legal action, the length of my existing 0% deals, and the possibility of refreshed 0% transfers.

Part of the balancing act is that the cards with the longest deals are also the ones that seem most likely to offer me new 0% transfers. But that is a gamble in of itself, if they don't, it will hasten the DMP.

I wasn't planning to go down this route, but the prospect of having a single creditor to deal with is quite appealing (but with circa £15K, they might go for legal action). Legal action perhaps less likely once I make it known to them that my loss in income is due to disability.

ManyWays

If it does end up DMP, the fewer creditors the better.

If it is in a DMP this makes no difference at all. 3 defaults or 10 is much the same on your credit record.

Altior

https://forums.moneysavingexpert.com/discussion/comment/82086929#Comment_82086929

One is better than three however, I suspect. Not that I will be applying for any new credit!

RAS

You'd be wise to keep some money as an emergency fund, and perhaps to reduce that £15k debt closer to £10k which might not trigger a strong a response? We just don't know their algorithms.

Savings below £6k don't affect UC but you need to be mindful that reducing savings to increase UC could be considered deprivation of assets. Tactically reducing debt to avoid legal action might be permissible.

Altior

Paying off debt is not considered DoC within UC legislation, so there are no concerns there.

I just calculated it now, and if I kept the capital instead and applied for UC with just under £16K capital, my minimum payments on the unsecured would be just short of £400 pcm. It only gets me to December if there are no new BT offers, as that's when two big 0% deals terminate.

I have a few income streams expected in the next few months, that add up to about £3K. Not gamechangers but should help me navigate the short term drop to £6K capital.

I feel like I can get it down to unsecured £10K debt, with nowhere to go other than paying the standard interest. If it goes to standard interest, I may as well then default and enter the DMP. But a DMP of circa £10K should be manageable. There is possibly a chance of write offs given my scenario, but it's not part of my strategy at this point.

Altior

I appreciate all of the input, and enjoy my thought 'process' and assumptions being challenged. Even though I've not thought of much else over the past year, there's always the prospect of me missing something obvious!

There is no right or wrong calls here, the way I see it. Just playing the percentages and hoping for a reasonable outcome. I have already committed to living a minimal existence until I gain pension access, which is perfectly fine.

In my own mind anyway, at this point, and what i am almost committed to, is reducing costs and increasing income is more prudent than retaining capital, as the route I take needs to be sustainable. I feel like holding on to the capital is only postposing the inevitable.

Altior

No firm idea how this is all going to pan out, but I have elected to take a hybrid approach. I still have accounts with good savings rates that are easy access, so I'll float around just under the £6K savings ceiling. The first hard line will come in December, I have opted not to clear that card yet. I have also triggered the mortgage charter, so interest only for the next six months, which bridges the gap to SMI, assuming all goes to plan. No Christmas pudding this year 😂

I have cleared a massive wedge of unsecured debt, it should at least increase the chances of getting refreshed BT offers on existing credit lines.

I will also put necessary spending on the 0% purchase credit card, as that will allow me to earn a bit of positive interest and keep some capital back. Interesting times ahead I suspect.

in_need_of_direction

well done on both decision making and acting upon it. How does that leave your debt levels?

Altior

https://forums.moneysavingexpert.com/discussion/comment/82094068#Comment_82094068

Thanks!

Broadly, halved the unsecured liabilities showing on the SOA earlier on the thread, with £6K capital remaining. £5.9K of that currently unusable for varied reasons.

Applied for UC, going through the checks, and have been approved for the mortgage charter. So now interest only until March 2027. Still waiting for UC and CT support to be confirmed, if it all goes through as anticipated I should be able to chip about £350 pcm off the total unsecured. With ad hoc income of circa £2K, which I'll also use to chip away at it.

I'd say a DMP is looking more likely than not, come around end of March. However one of my larger creditors, Nat West, told me when transferring that their promo transfers maintain the 0% rate even if payments are missed.

If I do go down the DMP route eventually, at the moment my aim it to keep £6K capital back. What I am not sure of yet is how to play that, ie to go cold turkey and wait for defaults once I can no longer avoid interest on one account, or go for breathing space and then DMP via a service provider like SC (without defaulting everything). I may well still have 0% deals running at that point. So perhaps just default when they individually run out. But those are variables to figure out next year!