Review of my First Year on the Orderly Payment of Debts
I began the Orderly Payment of Debts (OPD) with Money Mentors last year, in May of 2013, after being sued by the Canadian government over an outstanding student loan of almost $7000.
I had been thinking about getting my debts under control for a while, and even visited Money Mentors two years before to learn about the OPD, but it wasn’t until I was sued that I decided the OPD was simply an easier option than trying to handle my debt situation myself.
Since accruing my student loan debt in 2005, I made roughly one or two payments on it altogether, and even those payments were small, around $100 each. I based my non-repayment decision off of a rumor I had heard that went something along the lines of “If you don’t pay your student loan back within 7 years, it just goes away.” Turns out, if you don’t pay it back in seven years, you actually get sued and then they can garnish your wages.
I suppose like many Canadians, I just wasn’t raised with any knowledge of fiscal responsibility or management, and so when I got sued, I decided to skip the court date and go sign up with Money Mentors instead. I knew the OPD gave me protection against any legal action or garnishments, and it was very easy and quick to sign up for. In retrospect, I should have gone to the court date and told them it was my intention to do the OPD, and maybe they wouldn’t have added on the extra $1500 or so for the government’s lawyer fees and other charges.
Aside from my student loan, I had a few other debts that were mostly under $1000 each and were from cell phone companies, 3 credit cards I had received when I turned 18, and pretty much every cash advance company there is. My philosophy on cash advances was that once I got a cash advance, the interest they expected me to pay back was just too high for me to ever get out of the cycle, so I just wouldn’t pay back my loan and I’d go to a different company instead. In retrospect, my philosophy just should have been “don’t get an advance at all and work at getting a better paying job. “
In total, I signed up to the OPD with about $13600 in debt one year ago and I’m mostly happy with it. I cannot tell you how absolutely relaxing and almost even powerful feeling it is to have protection against creditors calling. I now answer the phone whenever it rings, with no fear of who might be on the other line. The OPD protects you from being contacted by any creditors. At first, when they would call, I would simply answer the phone and tell them that I’m on this plan and they have to discuss my case with Money Mentors. Then they would stop calling.
It’s peaceful, it really truly is.
And the payment schedule I worked out with Money Mentors is quite flexible in that they let you pick a payment date (mine is the 15th of every month), but it’s a soft date, in that as long as you pay by the end of the month, it doesn’t really matter what day you pay on. I love that flexibility, because so many of my bills like rent and car payments are due on a certain date and when you miss that date, you get all those extra charges and stress.
Also, with money mentors they say that if you miss 3 payments, you can be removed from the OPD with automatic judgments against you from all your creditors (sounds really scary), but that’s also flexible too in that if you miss a payment, and then do an extra payment another month, it’s as if you never missed that payment at all. It’s not like car insurance where if you go NSF on 1 or 2 payments, they just cancel your insurance outright (whoever thought that was a good business model?).
The amount I pay is $330 each month ($300 goes to debts, and $30 is the money mentors fees that I can get back if I successfully complete the program). It’s a reasonable number to manage, and actually it’s about to go down next month because I’m currently 9-months pregnant and soon I’ll be collecting EI on maternity leave for a year. I have an appointment to discuss my new budget with my counselor tomorrow morning, so I’m not exactly sure how much it will go down, but I think $100 less is all I’ll really need. I guess that’s another great thing about the program, the flexibility that when your budget changes, so too can your payments.
Now for the only real downside I see with the program (and it’s kind of a big one). With the OPD, you pay 5% interest, which may sound good, but after a year of making payments, I’ve paid slightly over $3000, and almost $1000 of that has gone to interests and fees. Eek! That seems like quite a lot. Many of the debts I’m paying off, I’d had for 8-10 years, and they certainly weren’t going up $1000/year, otherwise I would owe closer to $25,000 now. I think pretty much all my smaller debts from cash advances and cell phones stopped charging any sort of interest or fees after like 2 years of non-payment, and even my student loan only went up about $2000 in interest after 8 years. I’m actually a little angry that 1/3 of the money I paid this year isn’t going to the principle.
So I suppose that my advice for anyone thinking of joining the OPD would be that even though 5% interest sounds quite small, it’s really best to make the amount you owe as low as possible before joining up. I knew I wouldn’t be able to handle the student loan on my own, but I wish I had cleared up some of those small $400, $600, $800 debts before I joined. (Once you join, you cannot give preference to any certain debt or try to negotiate a payout with a creditor or you’ll be kicked out of the program). If I had cleared up some of the small debts, then maybe I’d only be paying 5% interest on $9000 instead of almost $14000.
I guess the interest is really the big downside, and then there’s another small downside in that I’m currently getting a degree in University, but because I have no access to any sort of credit, I have to pay for all my classes in cash. So while most of my classmates are going to be graduating this year after 4 years, I’ll technically be finishing my second year because I can’t afford a full course load each semester. But once I finally get my degree (probably after 7-8 years), I’ll have no student debt, so that’s kind of an upside.
There are a few other upsides to the program, such as I got to keep my Capital One credit card because it was in good standing when I joined the program and I can keep it as long as I pay it off completely each month. Also, I joined the program in May, but then started my own small business in June, and had no trouble getting a business license or business bank account (It was a $100 startup that has yet to make a profit, so I actually call it a hobby now more than a business). And now when I do my taxes, I actually get my tax return and GST cheques that the government used to keep.
But I guess the best thing is that it’s really nice to know there’s an end-date to me having to pay off debts (3 more years!), and I know I’ve already learned so much more about money and debt right now that I truly feel I’ll be prepared to make good financial decisions.