Debt consolidation and credit rating query

[ByHappyChance]

Asking on behalf of a friend, who is paying monthly to a debt consolidation company. He will get a sizeable lump sum in redundancy soon, and wonders if its better to pay off the debt, or not?

He contacted the debt company and they said if he settles now it will effect his credit rating for 4 years.

So what's the best plan?

It sounds like your friend is making monthly payments to a company who pay a token payment and "Save" the rest with the aim of offering a settlement at some time in the future.

Is this the case? If so his credit rating will be affected anyway so it makes no difference if he settles now. If he did what would happen to the money he has paid in so far?

Hi, he says he's actually paying the debt off. Will that change anything?

Is he in a debt management plan / IVA, or is it simply that he has taken a loan which he used to consolidate his debts?

If he is in an IVA or DMP the credit rating will already be badly affected and settling the debts will only have its advantages. He will be debt free, he may settle at a reduced rate and can make a free start.

Sounds like they just want to keep him in a DMP to make more fees, if he is not happy and they wont help him, he can settle the debts himself