Is it worth paying off a defaulted loan?

Rowan_2 · 7 December 2008 at 12:17AM

I asked this in the "how to improve your credit rating" thread, a few days ago, but havent had an answer. I hope there is someone who knows!

I have two defaults (due to clear in May 2010 and Dec 2011), and I could scrape together the money to pay them back. At the moment I cant even get a mobile phone because of the defaults.

If I paid them off, would it make a difference? Do lenders see a default that has been repaid as less of an issue than a default that is still being paid off?

Or would it just leave me exactly where I am at the moment with a complete inability to get even a phone (for example), and my parents being out of pocket (till I pay them back)?

Thanks.

clou19750 · 7 December 2008 at 12:19AM

Hi

Dont know if this will help but a default will stay on your file for 6 years regardless whether u paid it off or not

Ryan_Taylor · 8 December 2008 at 1:36AM

If you pay it off it will normally still remain on your credit report. However... if you pay it off, you could negotiate with the creditor to remove the item from your file. If not now, a couple years from now (which is better than 7 years from now).

Secondly, if you pay it off it will state on your credit report that the item has been paid. This doesn't help your score, but it looks better. You can at least explain to future creditors that there was a misunderstanding that you resolved as quickly as possible.

Rowan_2 · 10 December 2008 at 2:20AM

Thanks for the replies.

I have already asked them if they would remove the defaults if I paid them in full, they have both said absolutely not. (and more than once, I tried a few times, speaking to different people to see if it was just one awkward person on the other side of the phone)

So, it looks like its probably not worth paying them at any more than the small monthly amount agreed from now till the debts are paid off (which for one of them will be around 2019!)

I suppose that then leads to the next question - once the defaults are cleared, I take it the account stays on my credit record as I would still owe them money? So at that point, it is more worth while to pay it off than it would be just now. Kinda counterproductive I would have thought. I realise that people who dont pay back borrowed money should be punished for it, but I would have thought that lenders would consider getting the money back a higher priority than the punishment.

Ah well.

LilacPixie · 10 December 2008 at 2:29AM

As far as I know defaults clear from your record 6 years from the date of the default. You will still owe money but there should be no trace of it on your credit record.

Is it worth paying off a defaulted loan?

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