Paying off debts with Stepchange agreements

mollysmummy

Hi


My Brother has several debts for which he has agreed payments to creditors through Step Change.


He now has some spare money and is thinking about making offers to these companies for less than the balances outstanding in the hope that they'd prefer to get their money now rather than in £5 monthly instalments for the next 10 years.


The first one we've rang has said that they may accept an offer to settle the debt, but that it would be marked as not fully paid, but no longer outstanding in his credit file.


How would this affect him in the future? Is it worth it just to save a few thousand pounds?


Many thanks

Tixy

Hi

Always best to make settlement offers in writing and ensure you get in writing from them that the payment is in full & final settlement of the debt. (national debtline has a useful factsheet and template letter)

Assuming that these debts all already have defaults recorded on his credit file - then usually the partial settlement markers won't make his file look much worse than the defaults are already doing.

And any partial settlement marker would only remain on file for 6 years from the default dates shown on file. So if his defaults are already a few years old then the partial settlements would only impact him for quite a short time.

One likely exception might be if he is intending to try to get a mortgage / remortgage whilst the partial settlements would still show - in those cases it can sometimes be worth considering paying in full.