Partial Settlement from Lloyds - Lesser of two evils? Help please.

trashycharlie

I have a personal loan with Lloyds TSB which due to redundancy at the turn of the year is now in arrears making it close to £11k.

I have just recevied a letter from their collections department offering me a settlement figure of £7600. I have spoken with CAB and they said the catch is it will sit on my record for 6 years stating I had a loan and partially settled - obviously pointing out I was in arrears etc. The debate is whether it is worth it. I can't foresee buying a house or taking out another loan in the next 6 years but you never know. It doesn't mean it would be impossible anyway, just that creditors would know I'd previously had one and struggled with it.

My current loan (in arrears) has 4 years left. The partially settled debt would sit on my record for 6 years. I can't personally see much of a difference. Creditors would see I have been in arrears for the next 4 years either way.

I would have to take another loan out to pay the £7600 but I figure, as long as the APR is less, I'm always going to be over £3k better off.

It's a debate on whether it would be terribly detrimental for it to show on my credit record.

What do you think? Pay it off in full over 4 years and be £3k worse off or take out a second loan, pay off the partial settlement, save the money and have it on my record.

Please help!!

TMoose

If you are already in arrears you are likely to have great difficulty in getting another loan.

Your current loan in arrears will not only have "4 years" left on it, it will be around until you pay it - and any arrears - off. The arrears will already have affected your credit file.

Personally I'd take the settlement if you've got the cash. But I will be very surprised if you manage to raise the cash from a new loan.