IVA or DMP

Zodiac89

Morning, I'm looking for some advice.

We are intouch with Step Change and have been offered IVA and DMP and we aren't sure which to go with.

We have debt of £30k, we have our own home and our mortgage is up for renewal in April. 

We don't want to risk losing the house and understand that the interest will be higher.

Which is better?

Thank you.

sourcrates

You are a homeowner, so an IVA is an option for you.

Pros and Cons of IVA.

Cons - Formal debt solution, tight, restrictive budget, can last 6-7 years, any windfall or earnings above the norm must be paid to your arrangement, re-mortgage clause in year 5, dependant on disposable income, any debt write off not guaranteed, you may pay the full amount plus interest.

Pros - Legal protection from creditors, house is safe, all interest and charges stopped.


Pros and Cons of a DMP.

Cons - Informal debt solution, legal action still possible, interest can still be charged (however if you enter this type of arrangement legal action is unlikely, and interest is usually stopped eventually) many homeowners are on DMP`s, but there is a remote, very remote chance you may lose your house (highly unlikely, but I have to mention this as nothing is 100% guaranteed).

Pros - Very flexible, informal, if you go with one of the debt charities, you must play by their rules, if you go it alone and self-manage, you make the rules, you can do both, go with stepchange first, once you become savvy, go it alone, creditors usually accept what is offered, further down the line sold on debts may be settled for less than their current balance.

So, both options are open to you, depends on whether you want to do this formally, or informally, both may take the same amount of time to complete, both affect your credit file for 6 years, DMP is easier and more flexible, IVA not so much.

If you can truthfully say your income will remain steady for the next 6/7 years, then an IVA may suit you, trouble is in these current times things are quite uncertain, a DMP is completely informal, and very flexible, and would be my choice given the current financial climate.