Loan Advice

dickibobboy

Hello,
I am after some advice for two relatives of mine. 5 years ago they took out a loan of £25k. A payment has never been missed throughout the loan, the loan amount is nearly paid off but there is still alot owed because of the interest. I think she said it came to around £42k with interest!

Last year one of the relatives was made redundant and is still looking for work but with little qualifications, 57 and only experience it'd proving difficult. For the last year the insurance from the Natwest loan has been paying but the next payment will be the last full one and only a percentage will be payed which is going to be difficult.

They got a guide from the CAB to help going into the bank and offering some sort of payment. They can afford £100 a month which is what they will put forward.

Do you think the bank will agree to this? and is there any advice I could pass on?

Thanks

Tixy

Is the debt secured on a property or unsecured?

How have they calculated the £100 that they can afford? The bank might accept this if they are satisfied that this is genuinely all that they can afford -its likely they will expect to see an income & expenditure account - relatives don't have to supply it but then the bank doesnt have to agree to the reduced payment. They are likely to be issued with a default notice which will then affect both their credit ratings for years and make getting any new credit difficult.

Do they have other unsecured loans / debts? If they have but this is the only one they are planning on paying reduced payments to then the bank is less likely to accept the deal. You should treat all creditors equally and so pay pro-rata payments to them all.

They might also want to ask the bank to freeze interest (they don't have to but again they might if they believe its all they can afford).

Even if this is an unsecured debt do relatives own a property? and if so is there any equity in it? If there is and the bank are aware they may go down the CCJ route with a view to getting a charging order on the property. Should the debt go to court then they'll need to be able to prove to a judgethat the £100 they offered was reasonable based on their circumstances.

JimmyTheWig

Don't quite understand the bit about the loan amount is nearly paid off. Does that mean the loan is nearly finished?
How long did they take the loan out for?

dickibobboy

Tixy wrote: »

Is the debt secured on a property or unsecured?

How have they calculated the £100 that they can afford? The bank might accept this if they are satisfied that this is genuinely all that they can afford -its likely they will expect to see an income & expenditure account - relatives don't have to supply it but then the bank doesnt have to agree to the reduced payment. They are likely to be issued with a default notice which will then affect both their credit ratings for years and make getting any new credit difficult.

Do they have other unsecured loans / debts? If they have but this is the only one they are planning on paying reduced payments to then the bank is less likely to accept the deal. You should treat all creditors equally and so pay pro-rata payments to them all.

They might also want to ask the bank to freeze interest (they don't have to but again they might if they believe its all they can afford).

Even if this is an unsecured debt do relatives own a property? and if so is there any equity in it? If there is and the bank are aware they may go down the CCJ route with a view to getting a charging order on the property. Should the debt go to court then they'll need to be able to prove to a judgethat the £100 they offered was reasonable based on their circumstances.

The loan was taken out to pay for a static caravan that they no longer have. They have an income and expenditure form ready to write everything down but there is not much income coming into and i do believe £100 is what they can only afford (i don't know too much about what they have coming in, one of them is a full time carer for the other now)

There are no other loans, past credit cards that have been had have been paid off. They don't own a property any more as the property is a council bungalow due to the health of one of them.

I was told that the bank ask about cars and such and probably why they both do have a car. From what i can see to answer that would be one is on motability for the ill one and obviously the other relative cannot drive the motability car if it is not for the motability persons benefit. The car is bought so only insurance & tax is paid for. The outgoings each month apart from the obvious payments for living is £20 Sky TV and £30 phone bill, both of which are in contract anyway.

JimmyTheWig wrote: »

Don't quite understand the bit about the loan amount is nearly paid off. Does that mean the loan is nearly finished?
How long did they take the loan out for?

I don't know how long the loan was taken out for. What i was trying to say is the loan was taken out for £25k yet the total with interest comes to £42k. So far they have just about paid £25k of the loan so effectively paying the interest cost off now.

[Deleted User]

The lender wont question outgoings unless they are totally unreasonable(as in £200 a week food for 2 people),it may be better to get an appointment with CAB rather than just pick up a leaflet?
You cant say they are "effectively"paying the interest off now,they are paying the loan simple as that.were they to settle early they would get a partial refund of the interest.

BLT_2

dickibobboy wrote: »

The loan was taken out to pay for a static caravan that they no longer have. They have an income and expenditure form ready to write everything down but there is not much income coming into and i do believe £100 is what they can only afford (i don't know too much about what they have coming in, one of them is a full time carer for the other now)

There are no other loans, past credit cards that have been had have been paid off. They don't own a property any more as the property is a council bungalow due to the health of one of them.

I was told that the bank ask about cars and such and probably why they both do have a car. From what i can see to answer that would be one is on motability for the ill one and obviously the other relative cannot drive the motability car if it is not for the motability persons benefit. The car is bought so only insurance & tax is paid for. The outgoings each month apart from the obvious payments for living is £20 Sky TV and £30 phone bill, both of which are in contract anyway.



I don't know how long the loan was taken out for. What i was trying to say is the loan was taken out for £25k yet the total with interest comes to £42k. So far they have just about paid £25k of the loan so effectively paying the interest cost off now.

They seriously need to ask about getting the interest free. If the outstanding balance is 17k, based on an optimistic annual interest rate of 7% they will be reducing the amount owed by around 90p a month if they pay 100 pounds a month. After paying 100 pounds a month for 10 years the amount owed will have dropped by around 100 pounds in total.

If the interest rate is higher than 7% then they will pay 100 a month and their debt will continue to rise.

If this is the case they may as well just offer 10 pounds a month as the debt will never disappear

redpete

dickibobboy wrote: »

...the loan amount is nearly paid off but there is still alot owed because of the interest. I think she said it came to around £42k with interest!...

The loan is not 'nearly paid off'. They might have nearly paid the amount of the loan they took out but a lot of this would have been interest, especially in the early part of the loan. It might seem picky but I think it is important to understand how loans work and not fall into the trap of feeling a 'victim'.

one of them is a full time carer for the other now

Have they checked that they receive all the benefits they are entitled to?

one car is on motability for the ill one and obviously the other relative cannot drive the motability car if it is not for the motability persons benefit.

Not quite, as long as it is used primarily for the use of the disabled person it is OK.

JimmyTheWig

I make it something like 12.6% APR to be paid off over 8 years.
If that's the case they'd need to pay more like £200 a month to just stop the balance from increasing.

matthewsmith_2

dickibobboy wrote: »

Hello,
I am after some advice for two relatives of mine. 5 years ago they took out a loan of £25k. A payment has never been missed throughout the loan, the loan amount is nearly paid off but there is still alot owed because of the interest. I think she said it came to around £42k with interest!

Last year one of the relatives was made redundant and is still looking for work but with little qualifications, 57 and only experience it'd proving difficult. For the last year the insurance from the Natwest loan has been paying but the next payment will be the last full one and only a percentage will be payed which is going to be difficult.

They got a guide from the CAB to help going into the bank and offering some sort of payment. They can afford £100 a month which is what they will put forward.

Do you think the bank will agree to this? and is there any advice I could pass on?

Thanks

The interest is very Big!!!

BLT_2

JimmyTheWig wrote: »

I make it something like 12.6% APR to be paid off over 8 years.
If that's the case they'd need to pay more like £200 a month to just stop the balance from increasing.

Even if the interest is frozen, payments of 100 pounds will still result in it taking 14 years to pay off the balance, at which point the debtor will be 71. Do they really want to spend their twilight years struggling to pay interest to a bank? Go for the minimum payment possible, this loan is never going to disappear.