Seeking alternatives to a guarantor loan.

Knitworthy

Many years ago I was an undergraduate student, although I was bright enough to go to uni I was also stupid enough to get into debt. Due to family circumstances I had no one to ask for help or guidance and when I graduated I had a lot of unsecured personal debt.

I was quickly unable to manage this, as the basic math of my income versus my outgoing repayments did not add up. I soon realised this as held my hand up to creditors, and I’ve been on a repayment plan with them ever since (Not an IVA). I accepted full responsibility and have never tried to evade or reduce the amount owed.

Fast forward 10 years and I’ve paid off store cards, credit cards and a personal loan with my repayment plan. I’ve also managed to steadily increase my earnings and am now on around 31.5K.

My outstanding debt is 6.5K , this now sits with two agencies after the original lenders sold the debt on. I’m still under my debt repayment plan and am currently paying this down at £200 per month. Despite receiving payment every month for 10 years these two agencies still show me as being in default, and that is fair enough as I haven’t stuck to the terms of the original loan/credit agreements. I am able to pay more per month and using this approach could be clear in 12-18 months, but both agencies have said that they will not alter the statement of default until I am clear, no matter how high I put the monthly payments.

I’m not sure of all my options but I’d like to be rid of this debt as quickly and cleanly as possible and turn my credit rating around. I am currently unable to get a loan or credit card due to the bad credit history. I have not made multiple applications but I have looked at my credit file and it shows me as 'very poor'.

A relative, who is fully informed of my credit history, has offered to be a guarantor on a loan to consolidate these debts. I can see the benefits of having making a settlement on the outstanding amounts and having loan payments being met on my credit history. However I am reluctant to ask them to take on credit on my behalf, and I’m not 100% sure that a guarantor loan would help improve my history. Can anyone help to give me some other options to kick the final balance and turn my credit rating around?

bigadaj

Fair play for your approach though with the benefit if hindsight you could have gone bankrupt and had a clean slate after seven years.

If you are thinking if a guarantor loan then it would be far better for your relative to get the loan and give you the money and you to pay them back, as the rate would almost certainly be lower and they would be held liable in either case.

You could go back to your creditors and offer a lump sum as a full and final settlement of you had access to the money, they may accept less money upfront though if you're currently paying then your not ina strong bargaining situation. People can be reluctant to not pay in full sometimes as it will damage your credit file but yours sounds shot in any case so wouldn't make it any worse.

BonkersBonkers

Perhaps another way of looking at it is that you are still in debt but want to hide the fact in order to get into more debt.

I know that sounded harsh because at least you have had the balls to repay your debt.

If you have done without credit for some time what is the rush now? Have you got any savings?

gb12345

Knitworthy wrote: »

I’ve been on a repayment plan with them ever since (Not an IVA).

Who is your repayment plan organised throught?

If it is not through one of the debt charities then you are throwing a proportion of your £200 a month away on fees to the people who arranged it.

chesky

gb is absolutely right - go to your local citizens' advice bureau and make an appointment to see their debt specialist. They won't charge you anything and what you save on this can go towards your payments. They will also contact your creditors on your behalf to see if they will settle for a full and final settlement.

Tixy

What are the dates of defaults on these 2 debts?

To be honest trying to borrow money to pay them off now than in the next 12-18months probably won't make much difference to your credit 'rating'/ability to get credit.

The defaults will stay file for a period of 6years from the default date and then drop off after 6years (whether they are fully paid, partially satisfied, part way through paying them or unpaid).

You mention you have been paying these for 10years - is that 10 years from when you first fell behind with payments? if so and if the defaults are still on file then it is possible you may have a case to have the defaults backdated and therefore the record of the account and default would disappear from your file.

Knitworthy

Thank you Bigadaj for your response. Hindsight is a wonderful thing, but there was a certain amount of learning that I had to complete and I'm not sure that I would have done that had I gone down the bankrupt route.

If my relative was to take the loan direct and pass the money of for me to make direct settlements, are you able to offer an opinion if this would help to improve my credit rating? Or what additional steps I would then need to take to improve my position.

There is not so much a rush, but a feeling that now my circumstances are much improved that I should now be taking steps to turn things around. The suggestion of the guarantor loan was made with the understanding that it offered the joint benefit of clearing the outstanding balance and a stepping stone to repair my credit rating. Is this not the case?

Knitworthy

Thank you BonkersBonkers for you reply, personally I wouldn't say that I'm trying to hide my credit history. If anything I'm trying to acknowledge and repair it, but I appreciate that from an outsiders perspective it could appear that way.

There is no particular rush other than my keeness to improve my circumstances as quickly as I can and in the best way possible.

Knitworthy

Thank you gb12345 for taking the time to reply. My repayment plan was organised by me, so I'm not paying a fee to anyone. It has taken a huge amount of time and effort to organise and maintain over the past few years. So I hope you can appreciate my wish to end it and move on with life.

Knitworthy

Thank you for your reply Chesky, initially I did work with my local CAB for advice. However I found our local branch to be judgemental and unhelpful. They were only able to meet with me during office hours and I was warned by my employer that my job was at risk if I took time off for personal appointments. They also got a number of facts wrong from the information I supplied them. In the end I found it better suited me to go it alone.

Tixy

Knitworthy wrote: »

If my relative was to take the loan direct and pass the money of for me to make direct settlements, are you able to offer an opinion if this would help to improve my credit rating?

Depends on what your credit file shows at the moment in relation to these 2 debts and any other old debts. E.g. the dates of any defaults etc.

Knitworthy wrote: »

The suggestion of the guarantor loan was made with the understanding that it offered the joint benefit of clearing the outstanding balance and a stepping stone to repair my credit rating. Is this not the case?

Guarantor loans have awful APRs considering they are often medium to longish term loans - typically around 50% or so.
Some guarantor loan companies put a credit account entry on your credit file, some only on the guarantors file.

Whether having a new loan on your file will actually improve your ability to get credit/credit rating also still depends on what shows on your credit files now.