Interest Only to help with DMP?

Webbigail

Wonder if anoyone can advise?

We are looking to enter a DMP waiting to hear back fropm CCCS but as it stands we have about £250 a month to pay debts if we go for the DMP (at the moment we are paying£600 hence getting into this month). My question is that if we go interest only on the mortgage we could free up another £400 per month to put towards the debts, is this a good idea?

shell_girl

My gut reaction is no- as at some point the interest only period would have to end... by which point your creditors will have got used to the extra £400 per moth and may be awkward if you want to amend the figures. Just my totally uneducated gut reaction though- someone with a better understanding will be along in a minute

Katie-Kat-Kins

We'd need to see your SoA but probably yes. With an extra £400 to pay off your debts you could probably make a significant inroad on paying them off and so your payments would probably reduce before you need to go back to a repayment mortgage but it depends a bit on the length of the interest only period your mortgage provider will agree too and whether in that time you might have been able to completely clear a debt.

My inclination would be to work out whether you could make all your minimum payments if you went interest only. If doing this will stop you needing the DMP then it is well worth it, if not then maybe not.

churchrat

hi

I think it would depend on the interest rates on the debts on your dmp. If your creditors have agreed to stop interest whilst you are on the dmp I see no good reason to stop paying the repayment part of the mortgage. This will only lead to being longer on your mortgage.

GeorgeUK

I'm going pick the middle option: yes and no.

No: I would allow the DMP to be set up as suggested and wait to see what the creditors do. They may agree to put a hold on charges and interest which would be great but others may be more pushy and try to get you to pay more. Don't give in and don't let them bully you. I think it would be best to stick to the repayment plan for about 6 months before trying anything else.

Yes: After about 6 months have passed, you may be able to offer F&F settlements to some of your creditors. If it is possible to go interest only for a while and save the money for this, it may be worthwhile.

Have you reclaimed your bank and credit card charges too?