Debt Management Programme, is this the best option for me?

Sunraid

I am and have been on a debt management programme now for approx 3 years. This was setup because I managed to get myself into a lot of unsecured debt through stupidity (Approx 60k) and it got to a stage where i could not afford to pay my debtors the minimum payments. One of my debts is with Halifax its a loan and I owe them about £19k. The % they get means I am paying them about £140 per month, this means it will take me about 11 years to pay off (assuming the %'s are even that means it is going to take 11 years for all my debts to disappear). Being on this debt management programme means I am paying the minimum with the interest frozen I recently secured a mortgage but know i am paying a fortune in interest. Am i doing the best thing by being on this debt management programme or can someone advie me differently. Thanks in advance.

MyLastFiver

Well, I'm not sure of your precise circumstances but if you are able to make some kind of payment to your creditors, but not the full contractual payments, I can't see that you have any option. You are obliged to pay whatever you can afford off your debts, and this is enforceable in law.

The only other way out would be if you had a lump sum, such as equity in a property, to pay it all off in one go, but I'm guessing you don't at the moment.

As for your sub-prime mortgage, it's a simple question of what owning a home is worth to you. If it's worth all that money in interest, then go for it. If you were better off renting (at least until your debts are paid off and your credit file is better) then that's the thing to do.

It MAY be that the interest you now have to pay for your mortgage would have been better spent repaying your existing borrowing. However it MAY be that you house will rise in value over the next 11 years sufficiently for you to use the equity to repay your unsecured borrowings early. My money's on that happening, however in order to liquidize the equity you would have to either 1. sell your house or 2. take on more borrowing (in the form of an equity release loan). One is costly financially, and the other is costly in terms of lifestyle.

Being on a DMP is a pain in the neck, especially when you can see that it still has years to run. Sorry but you just have to keep plodding away. If it is any consolation, inflation is currently chomping away at your debt at 4.5% per annum. Even with fears of deflation next year, the average inflation rate over the next 11 years is likely to be between 2 and 3 percent. So assuming you get an annual cost-of-living increase in your salary, the real value of your debts is falling relative to your wealth.

Sunraid

Excellent advise, thank you!