How do you obtain a loan living on Disability Living Allowance?

Blue_Lou

Which company (if any) are most likely to offer a loan to somebody who has been off work since 2002 (they are still employed - they suffered a stroke whilst in work, Dr. has recommended retirement but said person will not listen and is determined to work again) and now claims disabilitiy living allowance?

Also, when applying for loan what employment status should be used; employed (he technically still is), unemployed (receives state benefits through no fault of his own) or retired (on Dr's recommendation)?

jonesMUFCforever

If he is employed then he will be in receipt of a salary - is this the case?
If he has retired he will be in receipt of a pension - is this is the case?
If neither applies he is technicaly unemployed.
Does he have any other source of income other than DLA? If not he might find it difficult to find a mainstream lender willing to lend until he is back at work.

lynzpower

Wouldnt said person get a loan from the social fund?

nomoneytoday

How would this person expect to pay the loan back with that income?

Blue_Lou

nomoneytoday wrote:

How would this person expect to pay the loan back with that income?

He's currently paying £183 per month on an existing loan. We are trying to lower the outgoings. This is the major one.

Blue_Lou

I take it that this is not possible?

Emmzi

Nothing is impossible, but at a low interest rate, not off as shark-like company.. unlikely, especially for consolidation of exisitng debt he's struggling with.

How much of a loan? A credit union might be a possible answer, although he would have to pay in savings for a few weeks before he could apply.

Blue_Lou

He suffered a stroke whilst at work in August 2002. He has not been able to work since. He knew the staff in the branch reasonably well and they were all aware of what had happened to him.

On the 13th September 2004 he was given a loan of £8,000.
The rate is 12.9%
The term is 84 months.
The monthly payment is £183.92 per month
The actual amount that goes towards the loan is £142.24.
This leaves £41.68 per month paying Payment Protection Insurance.

If the loan is left to run on until 2011 without overpayments he will have paid (84 x 183.92) £15, 449.28 including payment protection, without payment protection it would cost £11,948.16. I feel that the cost of £3,501.12 for insurance is ludicrous. He has paid £1,000.32 in the past two years.

The interest on the loan is front loaded and an early settlement is simply the loan amount + total interest – remaining payment protection insurance payments.

His income is £722 per month. The loan payments are soaking up 25% of his income. This leaves £539. Once the bills are out of the way it leaves £135 for food and miscellaneous expenses (less than £34 a week).

The reason is I gave the above information is to give an idea of how much the loan is costing in proportion to the other outgoings.

My step dad would like to cancel Payment Protection Insurance (freeing up the £41.68 per month). The loan was taken out when he was receiving disability living allowance and incapacity benefit (he still receives these to this day). He does not receive a salary from his employers or any other state benefit.
I stated earlier he has not worked since August 02 (two years before the loan was taken out). The branch member who sold the loan was well aware of this). She also knew what his income level was and that my step dad's employers had promised him his job back if he recovers.

Under of the circumstances I believe he has been missold the Payment Protection Insurance:

He was not working when loan was taken out

If he became unemployed it would be either due to redundancy or retirement under medical grounds and both would provide enough income to cover the loan payments (which will provide a higher income).

He has been promised his old job back if he recovers which provides a much higher income and he would be able to maintain loan payments.

I found a template on this site re: cancelling Payment Protection Insurance and asking for a refund, I customised it and sent it to the Colmore Row address in Birmingham.

We received a response a month later stating that they can not cancel Payment Protection Insurance as the terms were explained when the loan was taken out i.e. It needs to be before 30 days had passed etc. They also stated they could not refund existing Payment Protection Insurance payments.

Is there anything more I can do to help my stepdad?

Emmzi

Lou,

bumping this up the list a bit.

I wouldn't take a first no as a reply on PPI.. I'd lay it on thick about vulnerable people being taken advantage of and an unsuitable product - what exactly would it pay out for?He's ill and unemployed and it's not going to cover anything until he's been in employment again for what,12 months?And probably not pre-exisiting conditions then, either.

Failing that I can't see a reduction in payments unless he defaults on the loan and negotiates lower payments and frozen interest.

I would however look into the credit union thing.

Emmzi

http://boards.fool.co.uk/Message.asp?mid=9659780

Link to PPI cancelling letter from another helpful thread on this board.

jonesMUFCforever

It also provides cover in the event of a divorce or the death of the customer.

(You could always re-marry once the loan is paid off:rotfl:)