Self defeating curved ball - business loan

PHILHW

My first post!!

I am a director of a company, took out a business loan 2 years ago, and acted as a guarantor.

Company could not keep up payments, due to difficult trading times and the loan was defaulted.

The bank have now approached me personally and requested I come to a repayment plan in accordance with the guarantor.

I have no issue with this, and I am willing to pay the amount back.

However they are saying if I pay the amounts in installments (rather than one payment) then they will pass the loan to an external debt collection agency for them to manage. HOWEVER in so doing they will register a default against me on my own personal credit file!!!

I have a perfect credit file, with no missed payments etc in the past 6 years. One option I have is to go back into full time employment, to repay this loan. However I will need access to credit (for car, credit card etc), and a default of a large loan on my credit file is going to do me no favours in this current tight financial climate.

I have no issue with them registering the default against the company name. I have no issue paying the debt back as the gurantor over a period of time. However it seems self defeating for them, to register a personal default (in effect 2 defaults) against me. Not least it would prevent me obtaining a loan to pay it off etc etc etc.

Seems like they are shooting themselves in the foot for no good reason.

Can they do this, how do they register a default at the credit reference agencies for a loan which was not in my name?

I understand if I refused to pay, they could obtain a CCJ, which would go on my credit file, and I respect this. But a default when I am willing to pay over time???!!!!

MrsTinks

Primarily we deal with consumer debt on these boards - I don't know if anyone has any specific business experience that might advise that is normal on a business loan. I guess ultimately it depends on what you signed up to... does the original agreement state that if you couldn't pay as a guarantor in one lump sum then you would be in default?

ETA if your agreement DOES state it should be settled in full then yes they can default you and also go for a CCJ if they feel this is needed to protect their interests... all depends on what you signed up to really...

PHILHW

MrsTine wrote: »

Primarily we deal with consumer debt on these boards - I don't know if anyone has any specific business experience that might advise that is normal on a business loan. I guess ultimately it depends on what you signed up to... does the original agreement state that if you couldn't pay as a guarantor in one lump sum then you would be in default?

ETA if your agreement DOES state it should be settled in full then yes they can default you and also go for a CCJ if they feel this is needed to protect their interests... all depends on what you signed up to really...

Re the business side question, I appreciate that, but essentially the situation has moved on, and gone into in effect personal debt.

With regard to the lump sum, it was discussed when the loan was taken out, if things went bad, how it could be paid. In fact it would not have been granted if there was no "doomsday" route. This was that I could go back into full time employment and pay over a period of time. Pretty pointless if they ruin my credit file and make it difficult to have a financial life.

MrsTinks

Unfortunately I'd have to beg to differ - the loan is a business loan and the conditions can be different to your standard high street "Mrs Brown wants a loan for a car" loans... We have no idea really of the terms in business loans and what may or may not be considered fair... That's why I'm saying you may want some specific business based advice here.
Ultimately though what exactly did the agreement you signed say?

PHILHW

MrsTine wrote: »

Unfortunately I'd have to beg to differ - the loan is a business loan and the conditions can be different to your standard high street "Mrs Brown wants a loan for a car" loans... We have no idea really of the terms in business loans and what may or may not be considered fair... That's why I'm saying you may want some specific business based advice here.
Ultimately though what exactly did the agreement you signed say?

Yes I see your point, sorry was not trying to argue.

I do not have the paperwork to hand, its all packed away in storage, as we moved our business to our home, and the call from the bank was today.

MrsTinks

You need to get a hold of them and see what they say... they will be crucial to what the bank can and can't try to do... if you agreed to the lump sum settlement in the event the business defaulted then I think you'd need some very serious legal advice to judge if the bank mis-sold the loan in any way and if you have anything to prove it...

Best of luck!

PHILHW

MrsTine wrote: »

You need to get a hold of them and see what they say... they will be crucial to what the bank can and can't try to do... if you agreed to the lump sum settlement in the event the business defaulted then I think you'd need some very serious legal advice to judge if the bank mis-sold the loan in any way and if you have anything to prove it...

Best of luck!

Thanks for the info.

You know the feeling you get when you think, I know where something is, but can I get it easily!!!!! Been to storage area, and its right under all our furniture and equipment, holding it all up. Looked at the mess, and it then took me right down the depression route again, I have slightly risen after the shock of moving back home.

My urgency is that they are ringing back tomorrow to discuss the situation. They were very good about it, but said that is the process. They totally understood and agreed that by ruining my personal credit file, they would be unlikely to get the money back. Bankruptcy was discussed and the manager agreed that it would probably end that way.

I need anyone with general knowledge in this area of how guaratees are handled, a long shot I know, but its worth a post!!!!

The silly thing was I had agreed with them a payment plan and everything, and it was only a question right at the end that revealed they would place the default on my credit file. They say that if I refuse to setup a payment plan they will pass the file to a different debt collection agency, and things might go in a different direction.

MrsTinks

OK as far as what they can and can't once the debt belongs to you is more our forte
So IF they default you on the full amount (let's go down this way until we believe they can't?) then basically you will have a default on your file and as you know this will affect your chances of getting credit for a long time to come. How much exactly is the debt for and what is the likely monthly payment you can afford to make?
Make any offer of payment in writing and send recorded along with a personal cheque.
IF they decide to pursue this further through obtaining a CCJ (a lot will depend on if they think there is a benefit to doing this...) then if you have been paying them a regular monthly sum of what you can afford once basic living costs have been covered any judge is more likely to be on your side and only assign them the amount you have already been paying, so long as you pay the CCJ amount they will be unlikely to go for BR - but most of them like to throw it in... why? Because it's scary! And many people will beg still and borrow to avoid it and thereby repay the loan and the creditor is happy because THEIR risk has gone... you're now someone elses problem.

The first stage really is to find out if the paper work states they can default you personally as a creditor if the business has defaulted and you have not paid in full within a set time period. I guess you could ask them to send a copy of the paperwork to you if you can't get to the boxes in storage (I know the feeling - our house is on the market and we have stuff in storage as a result! Getting to anything at the back requires a torch and mountain climbing equiment and probably an extraction crew in case of landslides!!!)

If the debt is large enough then you may want to look into going BR - hard to say without knowing what the debt is and what your income would be likely to be if you got a FT job. If it came to this then getting some advice from one of the free debt charities in my signature might be the best move

It may sound strange but please remember... it's ONLY debt... it honestly is NOT the end of the world

DVardysShadow

PHILHW wrote: »

Thanks for the info.

You know the feeling you get when you think, I know where something is, but can I get it easily!!!!! Been to storage area, and its right under all our furniture and equipment, holding it all up. Looked at the mess, and it then took me right down the depression route again, I have slightly risen after the shock of moving back home.

My urgency is that they are ringing back tomorrow to discuss the situation. They were very good about it, but said that is the process. They totally understood and agreed that by ruining my personal credit file, they would be unlikely to get the money back. Bankruptcy was discussed and the manager agreed that it would probably end that way.

I need anyone with general knowledge in this area of how guaratees are handled, a long shot I know, but its worth a post!!!!

The silly thing was I had agreed with them a payment plan and everything, and it was only a question right at the end that revealed they would place the default on my credit file. They say that if I refuse to setup a payment plan they will pass the file to a different debt collection agency, and things might go in a different direction.

OK, are you able to meet arrears on the business loan and to continue to pay according to the original schedule?

If you are and you do, then you are meeting the requirements of the guarantee. So they would have no excuse to harm your credit record

PHILHW

In reply to MrsTine
LOL - the mountain rescue team springs to mind when I look at the storage lot. Thanks for making me laugh. I might have misled you slightly. The bankruptcy thing came from me. I said to them, and it was a very friendly call, that if they ruin my personal credit score then I might as well go bankrupt. The person agreed, and they have gone away to seek "legal" advice. The problem was we had got on very well, and agreed a short term payment plan (very low) and then review it in three months, along with a "small" lump payment right now. All very sensible. In this way it managed the process and sorted things out for a period of time, and was affordable, happy days for both parties. Until I asked about how things went from there, and the subject came up of recording a default. I thought they meant against they company, but they said no, it was against me, unless I paid the whole amount in one payment. They said if it goes to a management company, then it is the banks policy to record a default.

The thing is, and it was the point we both agreed, if they did that, I might as well go bankrupt, and they will not get their money back.

THe debt is just under £20,000.

to DVardysShadow
Sort of answered above I believe. Due to the business being our income, then we cannot afford it at the moment. However we had reached a payment plan, and a review period, etc etc. I said I wanted to pay it, had no issues. However if they then ruin my credit file, then its game over as far as I am concerned and I will just give up. I cannot keep fighting!!

Stewart_78

What I'm going to say may not be the right thing and it may be unhelpfull be I've been where you are and here's my bit.

You are concerened about your credit score but you have little or no income. So you want to be able to borrow money for what? If you can get a personal loan to repay this business loan in one go then do that. If you fail on the repayments you will default (as you have no income). If you don't do that you will probably default.

At the end of the day you told the bank that if the company went bust you would cover the loan, so now they are looking at you, not the company, you. If you can't cover it then you have to face up to that.

I also held my AAAAAA+++ credit rating as gold for far too long until I relised it was a mechanism for the banks to syphon money out of my pocket into theirs.

Apologies if I have got this wrong but I'm a company director too and the banks have taken me for a ride over the last 3 years. I think, at the age of 40, I have finally learnt my lesson. These people are not the sort of people you want to be in business with. My company is still going and is OK but personally, I've defaulted on everything. I care not. I don't want to borrow another penny as long as I live.