Best way to tackle established debt

m00se

Hi everyone. This is my first post here but I've been looking into this for ages and I just wanted to confirm I was going about this the right way before missing out on something more simple. This is long, like most posts in this board section, but I appreciate anyone taking the time to read and offer help.

I am currently employed in a stable job and have no bad debt. I have an active credit card (paid off in full every month by DD), a previous, paid-up loan (with the bank I hold my current account with, which was always paid off on time and never missed a payment, lasted two years and final payment was made in October 2010), two 0% finance deals (one on a motorbike and one on a sofa), various monthly contractual agreements with companies (mobile, Sky, etc) and have never missed a single payment on my credit card or any bill.

After much persuasion to take my help (she doesn't like taking help!) I am finally getting through to my partner who has, unfortunately, lots of very bad debt. Multiple unpaid, defaulted credit and store cards, unpaid and neglected credit card debt and old finance deals left unpaid and stagnated. This is all old debt, accrued several years ago. She has turned over a new leaf and for the last couple of years has been paying this back via a debt consolidation company (read: rip-off merchants). However, she still has several years left on this as her total debt, all told, is about £10,000. Clearly, not only does all this hideous bad debt destroy her credit rating, but will also obviously affect mine (since we have now got some bills in joint names etc). I realise that the most urgent thing she needs to do is stop paying £35/month to the debt consolidation scammers and get onto a simple repayment scheme, but it strikes me there is a better way to get her back on track with her credit score.

Sadly, I don't have ten thousand quid lying about. Would not a better way for her to get in the clear be to repay all the old defaulted stagnated debt in one go and then she can start with a clean slate? Obviously, with her current credit history Satan will skate to work before she gets a loan, but my credit history is untarnished.

So, my question is: is there a better way for us to fix this than for me to get out a £10,000-ish loan (in my name) and pay off all her debt in one go, and then make 'good debt' repayments on that loan over the next few years?

Many thanks indeed to anyone taking the time to read this and sharing your expertise.

Tixy

Hi

What bills do you have that are joint? are you certain you are financially associated on your credit files? you should only be associated if you have joint credit products (such as mortgage, loans, bank account with an overdraft etc).

If she has been on her DMP for a couple of years then chances are the damage has already been done to her credit file and it will not get worse and will also not improve much except for with time - ie she will have defaults on most if not all debts and they will sit on her file for 6years from the date they were filed.
You might want to consider getting her to switch to a free DMP run by one of the charities so she won't be paying the £35 a month and all her payment will go to her creditors.

I would suggest she contacts one of the debt charities - IMPORTANT - Where to seek professional impartial advice about your debts. rather than you take out a loan.
If you take out a loan you will be paying a lot of interest on it over the term. Whereas its likely some or even all of her creditors will have frozen interest.

Personally I think this is a much better way to help her and does not leave you potentially exposed to a £10k loan to repay yourself (eg if you split up, if she went bankrupt or couldn't pay for any reason).

Little_Miss_Uni-Debt

Hi M00se,

I agree with Tixy. I think the best thing you can do for your partner is to maintain your good credit rating.

Nothing repairs a credit report like many good payments over a LOT of time. Paying it off all in one go won't really help the rating, just relieve the pressure. However you would pay huge amounts of interest for that.

Maybe you should have a look at your partners credit report together to see what defaults there are and when they will fall off (6 years after date applied)

When your partner is on a fee-free DMP you'll be better placed to provide help because you won't have a large monthly debt repayment due!

m00se

Thank you both so much.

*snip*

I just wrote a big spiel but deleted it because writing my response answered the questions I was about to ask (nothing like hashing it over eh!)...

Essentially what I think you're saying is:

- the defaults are there to stay, and they'll only go away 6 years after they were listed anyway
- making regular repayments, even though it's on bad debt, will still be seen as a good thing
- doing it through CCCS (or similar) obviously better than debt management people
- making a large lump payment won't really help, because it'll seen as a quick fix rather than demonstrating a reliable credit profile
- could increase monthly payments to something near what we could afford on a loan and thereby shorten the term
- wouldn't be exposing to new loan risk
- interest would already be fixed by existing creditors


All correct? Please let me know if I've got it right. If so, I'll get on to CCCS later with her and we'll get on the road to recovery

Thank you again :beer: