Loan Repayments

HonestDebtor

Hi Everybody,

I am looking for some advice on how best to tackle our current loan repayments.

My wife and I have been paying off £1k+ every month for a few years now, and we were well on our way to clearing all of our various debts. Unfortunately, she has just lost her business and we are in danger of defaulting imminently.

Additionally, my wife has just given birth and is unlikely to receive any maternity pay due to the situation with her business. This means it will be 6 - 12 months before she is able to get a new job so that we can afford to pay over £1,000 a month once again.

We want to pay off all our debts as we feel morally obliged to do so. However, we simply cannot afford to make the payments for the next few months. Should we call the loan companies now and ask for help in a crisis? Is there much they can offer?

Ideally, we would like to reduce our payments for the next year and possibly freeze the interest. It may be worth noting that we have never missed a single payment to date.

If the various creditors agree to reduce the payments, will this have an adverse impact on our credit scores? If so, will this haunt our credit ratings for longer than if we simply default now and then agree to pay back smaller amounts?

Above all, we want to do the right thing and repay in full (meaning we're not interested in IVA's etc) but having browsed this forum I would like to try and ascertain (from your collective experience) just how best to achieve this without ruining our respectable credit rating (or at worst, how to minimize the length of time this will stay on our records for).

Thanks in advance!

happy_bunny_2

Hi

Anything you do that isn't full payments will damage your ratings.

Are all the accounts in one name or joint? Maybe you could save one of your credit files?

I would give a debt charity a quick call, stepchange, CAB etc. they will know your options and can advise best. CAB might also help with any benefits your wife may be entitled to.

Good luck

HB

HonestDebtor

Thanks HB,

Currently all the liabilities are in my name, so her rating would be spared.

We've been in touch with CAB and many more and unfortunately my wife is not entitled to anything except statutory maternity pay. The problem is that she cannot pay herself SMP as the business is overdrawn and has ceased trading. By the time the business is actually declared insolvent, her maternity leave will have finished, meaning she will have an outstanding dispute for the full amount with her own business! No other benefits apply as she should be getiing SMP (even though she never will).

So if my credit rating is going to take a blow either way, I read in another post that it would be beneficial to default first and then enter a reduced payment plan (i.e. a self-managed DMP). Am I right in thinking that this would mean my credit rating would start recovering 6 years from today? Whereas if I enter a reduced payment plan without first defaulting the credit rating won't begin to recover until 6 years after the final payment...?

It would seem the only way to save my credit rating would be to take out yet another loan to cover 12 months of payments, then return to 'normal' after a year (i.e. over £1k of DD repayments each month).

Thanks again for your help.

FalseEconomist

Just as an extra thought- the business that was meant to pay me maternity pay went bankrupt. It was a very stressful time and the claim took many months but eventually I got the smp I was owed back paid in a lump sum (around 4k). You probably know the situation better than me, but if your wife has been working she will be eligible for smp even if her own business can't/won't pay (and insolvency is a valid reason for not paying it). Smp is paid by the government who reimburse the employer anyway. Statutory maternity allowance is the same amount and is a benefit for those whose employer won't pay (for example they haven't been working long enough) but the woman can prove she has event enough to qualify in the previous weeks. It might take a while and you'd need the hmrc or dwp lot to
Help you with who/how you claim but I'm sure your wife will be entitled to this money eventually. I know this doesn't help in the short term but
I just didn't want you guys to miss out on money you might be owed. Good luck anyway, and try and stay focused on the positive things at the moment. My first pregnancy was ruined by money and debt worries - I wish I'd focused more on the happy stuff. Your wife and child's health matters more than a credit rating. A default will be gone in six years but you guys will remember this time forever.

happy_bunny_2

Only take the loan if you can get one (obviously) and you are sure that in a year you will be able to pay the required amount. Otherwise, you are just delaying the inevitable for a year.

Not everyone/many on here would agree, but I wouldn't pay until defaulted, which if you tell them you are not paying as you can't afford it should be a maximum of 6 months under ICO default guidelines.

Good chance of interest being frozen or the account sold, then you can pay. Credit rating then ok in 6 years. Slight risk of CCJ but they need to default the account before thinking about that so you should be ok.

Arrangements to pay and then a late potential default will screw you longer. Crazy system, but there you go.

HB

HonestDebtor

Thanks everyone, looks like it would make sense to default as early as possible if a default is inevitable somewhere along the line. That answers that question!

However, I'd rather keep my rating in tact and pay off everything. It's the only way we'll learn our lesson!

I've decided to get a loan to cover the direct debits for 7 months, and leave us with a small but manageable weekly allowance. This way, we'll be living on the bread line until April but then the wife can go back to work and we can get back to paying the debt off.

I just keep thinking how good it will be when the debt is finally clear and we suddenly have an extra grand spare every month!

Case closed... for now!