Pay off debts or wait?

tippytop

Hi Everyone I could really do with some advice.

In 2004 I got into terrible debt and owed about 20k. I went to CAB and set up a DMP where I paid off my creditors what I could afford and they stopped the interest. I have been careful to never miss a payment and when I had spare cash contacted the debt people to do reduced full and finals.

I now only have two debts left one for 8.5k and £900 on a student loan. Unfortunately a few weeks ago I lost my job but I received a 7k payout. I spoke to the people I owe the 8.5k debt and they offered a 30% full and final which means I could be completely debt free for £6850. I have 2k savings which i built up over the years as an emergency fund.

I so want to be debt free but don’t know what I should do for the best.

1.Pay the £6850 and hope I get a job quickly (which is not very likely in the recession).
2. Hold on to the money whilst continuing to pay debts monthly and try and budget until I find a new job and then use it to pay off the debts then. Biggest fear is with no job there may be little left and it will take even longer to get out of debt.

I also really want to clean up my credit file which shows I defaulted in 2004 so I guess they will come off next year anyway.

Could someone wise tell me what they would do?

lxpeanut

Its something only you can decide. I think the first thing you need to do is work out your budget. Check that while you are looking for a new job you are not going to get into more debt. I would at least hold on to the money while you get your benefits sorted out. Once you are sorted out I would consider using it to pay off the debt so then at least its one less thing to worry about.

The other option is to put it in an ISA untill you are back working. That way you know the money is there in an emergancy but its not so easy to get to you spend it. Contact your creditors and tell them that you are out of work and pay token payments. Then once you are back at work offer them the full and final payment if you haven't needed the money.

What I deffinatly wouldn't do is use the money to carry on paying the same as you are now as it will just use the money up without greatly improving your situation.

tippytop

Thank Ixpeanut.

I think you are right. The last thing in the world i want to do is to get into more debt. I have applied for JSA and i think it would make sense to put the money in an ISA.

I have been budgeting like crazy for the last few years so i dont think that will be too much of a problem.:beer:

Numpty_Monkey

I'm definately not one of the wise ones:o,
and sorry to hear about you losing your job, I know the feeling of trying to find another job at the present time.

My gut feeling is to go with your option 2, you will need the money to live off
or
Option 3
YOU make a cheeky F&F offer:p offer say 20%,, worth trying if you are unemployed

tippytop

I never thought of offering less! I guess i have nothing to loose.:Tthe worst they can so is no.

I think i will give that a try first.:D

Numpty_Monkey

I was replying when lxpeanut posted , that is very good advise:T

tippytop

:A
Will do Merlin. thanks

tippytop

being debt free is my number one goal. when i think back to 2004 (sleepless nights and constant phone calls from DCA) i never thought the day would come when i would not owe anyone anything.

I saw on another thread today that you can offer DCA between 25%-50%. I know i had the choice to take the debt so maybe not morally right.

What do people think about offering less?

tippytop

Good point about the MP's.

First thing on Tuesday i will contact the DCA and offer the reduced amount that i can afford. Clear my debts and never look back.

Maybe the payout from my job is a blessing in disguise. :beer:

Buddingblonde

If you are going to hold onto your payout, bring it down to under £6000 - savings under 6000 dont impact on income based benefits - over £6000 do.

Numpty_Monkey

tippytop wrote: »

I saw on another thread today that you can offer DCA between 25%-50%. I know i had the choice to take the debt so maybe not morally right.

What do people think about offering less?

Morally, i agree in paying back what you borrowed, :A
and a little bit of inetrest:rolleyes:
it's the fees, interest, and mathmatical wizrdry they come up with, and the attitude of the companies that I have problems with:mad: