Sometimes it’s not clear which is the right way out of debt for you and your family. Obviously you want the most comfortable journey if two routes will get to the same place at the same time!
But you need to make choices now, without being sure what is going to happen over the next few years or how your creditors will react.
Look at some of the possible trade-offs:
- if the easy way will take 8 years and the hard way will take 3, you might prefer to grit your teeth and get it over with;
- the easy way may not work, but the hard way is more certain;
- the hard way will give you a better credit record than the easy way;
The big choices
There is no “one size fits all” solution to debts.
If you are young and single, you will have different priorities and timescales from someone with a young family or approaching retirement. So your preferred solution might not be the choice that someone else would make.
Sometimes a direct comparison of two options can help:
Some points to think about:
- How far should you cut back? If you have already made cut backs and you can still hardly manage the minimum payments, or your debts are increasing, look at a DMP.
- If you may be able to get an affordability refund, a DMP may be your best option. Winning any affordability complaints will really speed it up.
- Don’t let worries about your credit score stop you from taking the right decision to tackle your debts. But if you can’t clear your debts, you can never save a deposit, so don’t let daydreams about a mortgage stop you from sorting your debts out.
- If you have a mortgage and you are worried about what will happen when your fix ends, read Getting a new mortgage fix with poor credit. For most people, you can stay with your current lender without having any affordability/credit checks. So this is not a reason to postpone deciding what to do about your debts.
A Breathing Space may sound like a lovely idea, but it doesn’t actually solve your debt problems. If you stop paying the debts during a breathing space, your credit record is still harmed. For many people there is no need for a Breathing Space as it’s clear which is your best option, so you can get going on that without a delay!
An uncertain future
In 2023, the last few years have upended so many people’s lives in ways they never expected, with Covid and the cost of living crisis.
This isn’t a reason not to make a decision now. But it does mean that it may be better to go for options that are fast, like bankruptcy or a DRO, or which are fully flexible like a DMP.
So think ahead to what could happen in the next few years: higher mortgage payments? more children/children leaving home? is your job insecure or might you get promoted? are you likely to retire or inherit money? meet a new partner?
This may feel a lot like guesswork, but it’s better than just assuming things will remain the same!
Talk to other people – see Good places to get help and advice.
If the call is finely balanced and you keep changing your mind, in the end you have to make a decision. There is no point in delaying for months or years if nothing is changing or your situation is getting worse.
If in doubt, go for a DMP and then review your decision in 6 months time.