How do I prioritise repayments?

acheekymunky

Hi,

I have finally called all my creditors and arranged to pay them direct as the debt management company I have been with since 2007 had increased their fees to 40% of my monthly payment!

What I would like to know is...I know have current figures of my outstanding debt and have worked out each of my creditors as a percentage of my total debt figure.

I have 8 creditors and they have all frozen the interest...I have a debt for £20,869 divided into the following percentages.

28.03%
27.02%
16.22%
13.88%
6.04%
4.96%
3.30%
0.56%

What is the best way to repay? concentrate on getting rid of the smaller debts first then hammer away at the bigger debts?! etc etc

Any advice would be greatly appreciated.

Thank you

Tixy

Hi

In a self-managed DMP its usually advised to treat your creditors in the same way as a DMP managed by a third party. So work out the total amount you can afford to pay per month, and then pro-rata that on the percentages above. If you treat all your creditors equally (and they can see that you are) then they are more likely to accept your repayments and to stop interest & charges etc (or not to start them again).

Have you cancelled your agreement with the DMP company? have you written to your creditors to say that you will be taking over your DMP and be in touch soon once you have worked out what you can afford each month?

If you had said you were paying token payments for one month whilst you got your figures sorted etc then you might be able to manage to pay off that very small debt in full before calculating your repayments but that is probably the only exception I would make to the normal pro-rata method.

acheekymunky

Hi,

Thank you for your reply! Ok, I had actually worked it out like that....worked out the amount I could afford to repay then worked out what that would be for each creditor (based on the pecentages). So I will continue with that, that way they all get paid equally and as you say it may help me in the future when agreeing the stopping of interest etc.

I have set up payment arrangements with all my creditors and wrote to them advising I will be dealing with the account, no longer the Debt management company. I have put in writing to debt management company what is happening and when I spoke to them on the phone my account manager (who I have not spoken to since 2009!) said he see's my point and can't really argue with why I want to leave!
Again thanks for you reply