Debt help - to pay off or not?

[jjejed]

I have a DMP with Stepchange that I've been paying off for a few years. The monthly payment is around £300 per month and there is nearly £7k still left to pay.

We recently inherited £10k. We are now wondering whether we should use this to pay off the debt, and then use some of the £300 per month to build our savings back up gradually, or whether to continue with the DMP and keep the inheritance as our rainy day savings. (We don't have any other savings at the moment)

Can anyone advise which is the best option? Thank you

What interest rate are you paying on the DMP? Unless this is very low (lower than you'd earn from paying the £10k into an ISA or similar), OR unless you are expecting any major expenses in the next 2 years (e.g. old car than will likely need to be replaced within this timeframe), then I would pay off the debt. You'll still have £3k left which is a reasonable level of rainy day savings, enough to buy a cheap runaround car if yours dies, or replace a boiler or fix the roof or other common house problems. If you then save £200 p/month (giving £100 as additional monthly spends), you'll increase this to over £5000 within a year and well over £10k within 5 years which is not too bad at all...

I don't think that the creditors you are paying off via a DMP would be very happy if they found out you had 10K tucked away and they do sometimes ask for an updated income/expenditure where you would need to declare it. Pay it off.

You will have £300 more a month if you pay it off with the inheritance. Also, this could be important if you are looking to get a mortgage etc in the future, your accounts will show as ‘settled’ when you pay them off as opposed to defaults or arrangements to pay. They will fall off your credit report three years sooner than if you waited till the DMP was finished.

Go over to MSE and get proper advice from very experienced people who have spent years dealing with debt and advising others. Have a good look around and read how others have managed to clear their debts.

forums.moneysavingexpert.com/categories/debt-free-wannabe

Very many of those asking for help there are in a DMP and they are shown the correct way to handle how to pay off debts which include offering your creditors full and final settlements.

I had a DMP also with Step Change around 6 years ago and i owed around 10k at the time that my grandma died and i inherited her house! I contacted all of the debtors and they all took offers on what i owed - one i owed 5k to and they took 3k as full and final payment - i paid less back to every single one in the end! So it might be 7k on paper but if you ask i am sure that they will take a lower amount.
And i agree with a PP - they used to ask me for updated income and expenditure and savings information. Get it paid off - it will feel like a weight has been lifted!

Call Stepchange and ask for their advice. They may be able to approach your creditors and make settlement offers on your behalf

Is that 7k in total or just what you will pay back and the rest of the debt is wiped?

My friend recently got a lump sum from her pension and the company she was repaying debt too accepted a lower amount to clear the debt. She just asked, they went away and came back and said yes we accept your offer

You need to tell stepchange.

Definitely go and visit the debt-free wannabe board on MSE before you contact anyone.

And regardless of what anyone says, you don't need to tell anyone if you don't want to. It's perfectly OK to save the money as a rainy day fund.

Sorry for the multiple messages.

If the debts are all defaulted already, they won't fall off your account any sooner than 6 years from the date of the default, whether you pay them off or not.