Best way to clear overdue loan?

wma21

Hi,

I'm looking for advice regarding a loan I've had under an arrangement to pay with a high street bank for some time now, and I'm unsure of the best way to repay it, in terms of my credit rating.

The loan was originally for £15,000. I was made redundant within 12 months of getting the loan, and found it difficult to repay.

I contacted the CCS, went on to a debt management plan for it, which I've subsequently come off due to delays with them paying the bank.

I'm now paying £200/month, with interest frozen, although it's been restructured with front-loaded interest a few times, so they've had their fair share of interest!

The balance is around £10,000, and I'm now in a better financial position, and am trying to rebuild my credit rating, which is being destroyed by this loan's arrangement payment every month.

They've offered me a £5,000 settlement for the loan, however this will show it as only partially satisfied on my credit file.

What would be better to do:

Continue to pay £200/month+ to pay it off in full, and continue to have the arrangement on my file for many more years, but fully satisfy it.

or

Pay the £5,000 settlement offer, partially satisfying it, and closing the account?

I'm looking to have a mortgage in the next year or two and my rating is currently around 480. I have credit cards and bank accounts that have never missed a payment, although I had some defaults from 4-5 years ago.

Any advice would be appreciated!

patman99

The defaults will come off your file after 6 years, so this will help your credit score.
You state you are now in a better financial position, so I guess you are back in work.
If you pay the £5k, this will be on your history for 6 years, but all your cc defaults will disappear in 2 years. If you can hang-on for 2 years, then you should get a mortgage. Make sure when you do, you get a mortgage without early repayment fees so you can switch to lower rate mortgages as your credit score improves.

happy_bunny_2

Maybe ask on the mortgage board. Mortgages search 6 years history. They know brokers so will be able to advise on which is seen as best.

APs are bad and stay on for ages.

I would take partially settled I think. Will they mark it as defaulted though? As if so that's not good. Best check.