Case studies for debt solutions
Case study re: Debt management
Derek contacted us back in August 2010 regarding some assistance with repaying his debts, which had built up over a couple of years from borrowing personally to support his window cleaning business.
Due to the nature of his business, Derek could only be contacted in the evenings via email as he had not discussed his money problems with his wife because of his feeling of embarrassment. Initially this client actually wanted a consolidation loan of £27,000 so that the monthly repayments could be contained within his cashflow from the business. However we carried out a calculation of the loan amount required and found that he would be paying at least 15% APR on this and that, with interest charged to date for each of the 8 debts he wanted to consolidate (including his secured loan against the house), the actual amount he needed to borrow was at least £4000 more. This meant that he would be adding to his debt not clearing it.
Derek had already missed a number of repayments to some of the debts, and 2 creditors were threatening to take legal action to recover their debts because of the poor payment history. As Derek is a home owner, with his wife, this could be a catastrophe with the risk of a charging order against the house as well as the secured loan he already had to pay.
In view of these developments it was clear that he would not succeed in obtaining any further borrowings and that further debt would not be the right way forward for him.
A detailed review of his personal circumstances and calculation of his household budget established that after all his and his wife’s expenses they are left with a disposable income of £335 per month. However, as all of the debts were in his sole name he wanted to leave his wife out of any payment arrangement. Acknowledging this situation, a recalculation based on just his income showed he could afford a monthly payment of £100 to cover all of his unsecured, non priority debts, which amounted to £5000.
We came to the conclusion that a debt management plan would be a good option for him, with the following benefits for Derek:
- One monthly affordable payment
- Informal arrangement
- He avoids personal embarrassment
- We would deal with his creditors
- We negotiate with creditors within 3-6 months to freeze or drastically reduce the interest and charges
- Client would receive a personal service from a highly skilled case worker
All the paperwork was sorted out within 5 days and Derek is very happy with the service he is receiving.
Case study re: Debt management fees
Mr A (Andrew) contacted National Money to discuss his money problems, as he was unhappy with the service he was receiving from his current debt management provider, and continued to experience many calls from creditors who were unhappy with the payments they were receiving. He felt he was paying too much in fees for such a ‘poor service’ and wanted to see what else was on offer.
Andrew advised he had done some shopping around and wanted to know what help National Money could offer.
We discussed his current money problems in detail, and his experiences with his current plan, and established he has approximately £6000 of debt, but that the maximum he can afford each month is £100 per month.
He didn’t need lower payments but the company he was using to that point were charging him 50% of his monthly payment in fees, meaning only £50 per month was actually being paid to his creditors. At this rate it would take him over 10 years to clear the debt! Little wonder the creditors were unhappy!
We discussed the benefits of moving his plan over to National Money; our fees are 50% less than he was paying the other company, and therefore through moving to us he would clear his debt in approx. 6.5 years, meaning he would be debt free 3.5 years earlier, whilst not paying any extra from his income!
Andrew moved his arrangements to us immediately, and since we became involved, the hassle from creditors has stopped completely. We will review his situation in another 3 months to see how he is managing, and will report again to the creditors at that point to update them.
