How can I swing something with the bank that's better for them than having a client in an orderly payment of debt arrangement?
October 30, 2011 1:03 PM Subscribe
Does anyone here have experience with an Orderly Payment of Debt program? I think this program is only available to Canadians specifically, and in some provinces only. So Canadians: my question is really - what do I offer the bank to sweeten the deal for them if I go to them and say: "either you do this for us, or we are going to have to enter into an OPD program"?
My husband just got laid off. Even without this disaster, we are chasing our tails trying to pay off our debt. It's just under $40K. My husband makes a good income when he's working. We always make our minimum payments, often more than that, and yet we're not getting ahead. It's either that the interest is too high and so it's two steps forward, one step back, or something like a layoff happens, forcing us to rely on credit again and putting us back on that first step again. Now, unless he finds good work right away, (not likely - he'll find work, it will just be at a reduced income) we are not going to be able to make ends meet. I am at home with our 13 month old and working won't make me enough for it to be worthwhile after you subtract daycare costs. I am trying to finish training to start a more lucrative career, but can't afford to take courses fast enough to graduate any time soon.
We already consolidated some debts once. I don't think they'll let us do it again. We are thinking about Orderly Payment of Debt - this means an independent agency takes one payment per month and pays the creditors. Your interest goes down to 5%. Your single payment is less than the sum of the multiple payments you are currently paying. You still have to pay off all of your debt. But it screws up your credit, and you can't use credit at all during the program (this freaks me out because there are always, always emergencies). We could likely pay everything off in under three years.
Thing is, I'd rather not do this. I'd rather negotiate with the banks. I just don't get - what do I ask for? What leverage do I have? What do they stand to gain by making some kind of deal with me instead of receiving whatever money they will get (at the reduced interest rate, I mean) if we go with an OPD arrangement?
My husband just got laid off. Even without this disaster, we are chasing our tails trying to pay off our debt. It's just under $40K. My husband makes a good income when he's working. We always make our minimum payments, often more than that, and yet we're not getting ahead. It's either that the interest is too high and so it's two steps forward, one step back, or something like a layoff happens, forcing us to rely on credit again and putting us back on that first step again. Now, unless he finds good work right away, (not likely - he'll find work, it will just be at a reduced income) we are not going to be able to make ends meet. I am at home with our 13 month old and working won't make me enough for it to be worthwhile after you subtract daycare costs. I am trying to finish training to start a more lucrative career, but can't afford to take courses fast enough to graduate any time soon.
We already consolidated some debts once. I don't think they'll let us do it again. We are thinking about Orderly Payment of Debt - this means an independent agency takes one payment per month and pays the creditors. Your interest goes down to 5%. Your single payment is less than the sum of the multiple payments you are currently paying. You still have to pay off all of your debt. But it screws up your credit, and you can't use credit at all during the program (this freaks me out because there are always, always emergencies). We could likely pay everything off in under three years.
Thing is, I'd rather not do this. I'd rather negotiate with the banks. I just don't get - what do I ask for? What leverage do I have? What do they stand to gain by making some kind of deal with me instead of receiving whatever money they will get (at the reduced interest rate, I mean) if we go with an OPD arrangement?
Response by poster: Sorry to be unclear. What I want from the banks is 1) something like a 6%-10% interest rate (instead of 18% on some of the debts) and 2) at least a slightly reduced minimum payment. Our payments now are $360 + $75 (interest only) + $325 + $125 (interest only) + $625 = $1510. None is secured debt. If between them all we could bring payments down some (I'm really not sure what to hope for) it would help greatly.
I also want not to screw up our credit terribly (it will be in the toilet for 6 years, I think. Perhaps less, have to talk to counselors). And I want not to have to go without credit for three years. These are what will happen to us if we go the OPD route. This is why I want to work with the banks.
posted by kitcat at 1:55 PM on October 30, 2011
I also want not to screw up our credit terribly (it will be in the toilet for 6 years, I think. Perhaps less, have to talk to counselors). And I want not to have to go without credit for three years. These are what will happen to us if we go the OPD route. This is why I want to work with the banks.
posted by kitcat at 1:55 PM on October 30, 2011
I'm confused. You've already answered your question. The way you ask for your debt to be easier to pay is... by asking for it. The leverage you have is that with OPD, the bank will not receive more than 5% interest. You are offering 10% interest, which is difference of ~$2,000 a year between your creditor. So, what's stopping you? The worst the bank will do is say no.
I do, by the way, think that the bank will say no. Debt modification plans in general have a horrid success rate, and you are giving all the indications that you will not be able to repay your debt. The fact that you are not willing to work, and your husband is not likely to work, and with your previous income not sufficient to pay down your debts, and that your future income is at best going to be less than your previous income, means that you are effectively insolvent. You just aren't admitting it yet. In situations like this, you should be considering bankruptcy, to be honest.
posted by saeculorum at 2:42 PM on October 30, 2011
I do, by the way, think that the bank will say no. Debt modification plans in general have a horrid success rate, and you are giving all the indications that you will not be able to repay your debt. The fact that you are not willing to work, and your husband is not likely to work, and with your previous income not sufficient to pay down your debts, and that your future income is at best going to be less than your previous income, means that you are effectively insolvent. You just aren't admitting it yet. In situations like this, you should be considering bankruptcy, to be honest.
posted by saeculorum at 2:42 PM on October 30, 2011
Well, sure - tell them you'd like to OPD, and then see if they'd be willing to change terms to suit.
They get a bit more interest, and a bit higher payment probably if you don't go OPD.
Ask them what *they* are willing to put on the table, then negotiate up a bit.
On the other hand, if you will be paying less per month, is there any chance you could use the rest to build up an emergency fund?
Finally, if you husband has been laid off, you can both get cracking on the job hunt, and see who gets the better paying job first, or, if that's always going to be your husband, see if you can get a temp job while he is looking for full time work and parenting your child, just to tide things over.
posted by Elysum at 2:42 PM on October 30, 2011
They get a bit more interest, and a bit higher payment probably if you don't go OPD.
Ask them what *they* are willing to put on the table, then negotiate up a bit.
On the other hand, if you will be paying less per month, is there any chance you could use the rest to build up an emergency fund?
Finally, if you husband has been laid off, you can both get cracking on the job hunt, and see who gets the better paying job first, or, if that's always going to be your husband, see if you can get a temp job while he is looking for full time work and parenting your child, just to tide things over.
posted by Elysum at 2:42 PM on October 30, 2011
Response by poster: you are effectively insolvent. You just aren't admitting it yet
Maybe you're right, but I think we CAN pay it off in full - it will just take...a long, long time unless we get some leeway here. My husband grosses about 80K. Depending on the job hours, travel allowance and overtime, he has the potential to make 100K. This layoff is a temporary and relatively rare blip. He's in the trades; this is just part of the game. His income in the next 6 months may go down to 60 or 70, but it will go up again. And within a couple of years, I should be making at least 40K.
Anyhow, I appreciate your answer (just ask them, dummy) and especially your calculation. Thanks.
posted by kitcat at 3:20 PM on October 30, 2011
Maybe you're right, but I think we CAN pay it off in full - it will just take...a long, long time unless we get some leeway here. My husband grosses about 80K. Depending on the job hours, travel allowance and overtime, he has the potential to make 100K. This layoff is a temporary and relatively rare blip. He's in the trades; this is just part of the game. His income in the next 6 months may go down to 60 or 70, but it will go up again. And within a couple of years, I should be making at least 40K.
Anyhow, I appreciate your answer (just ask them, dummy) and especially your calculation. Thanks.
posted by kitcat at 3:20 PM on October 30, 2011
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posted by dhartung at 1:37 PM on October 30, 2011