What to do when you can't meet the minimum payment

Getoffmycloud

Hi guys, I'm full of questions today! In December 2013 I decided it was time to get out of debt and have been working steadily to pay off debts since then. I have a CC from Virgin which was around £4500 at that time. I wrote to them and said I couldn't pay the minimum payment and we agreed on a payment plan and they agreed to suspend charges. Brilliant I thought and didn't think much of it, I just kept plowing away at the debt with the agreed payment plan, that is until a month or so ago when I received a letter saying I was meeting the minimum payment (which is now around £550). Checked my credit file and of course I have late payment fees against this. Silly me thought that as we had agreed a payment plan, I wouldn't have to the large minimum fee. I would like to buy a property in a year or so and obviously don't want these black marks on my file. I have been plowing as much as I can into the debt the last couple of months by selling everything I can get my hands on and making around double the payment we had agreed on, but the minimum payment hasn't come down much and I can't afford to pay the whole £550 to get rid of it. Any advice would be greatly appreciated.

~Beanie~

You will have 'black marks' on your file and I seriously doubt that you can get rid of them. Even though you made an arrangement with Virgin, you still are not meeting the contractual monthly repayment and it will be recorded as such on your credit file.

DevilsBakBone

Hi,

You need to do everything you can to increase your credit score. mortgage providers no longer focus purely on your wage, and this score will be important.

If you are serious, i would recommend the following...

1. Pay the minimum payment ASAP, your credit rating will not increase until you start making the min payment and meet the agreed terms of the credit card.
2. Get another credit card and pay for petrol only (or something regular), with a full balance DD. will build your rating back up.
3. Don’t apply for credit more than twice in 6 months, as it will tell the creditors that you want to get into debt (at least that’s how they see it... more black marks).
4. Get on the electoral roll.

Hope that helps.

Anthorn

Getoffmycloud wrote: »

Hi guys, I'm full of questions today! In December 2013 I decided it was time to get out of debt and have been working steadily to pay off debts since then. I have a CC from Virgin which was around £4500 at that time. I wrote to them and said I couldn't pay the minimum payment and we agreed on a payment plan and they agreed to suspend charges. Brilliant I thought and didn't think much of it, I just kept plowing away at the debt with the agreed payment plan, that is until a month or so ago when I received a letter saying I was meeting the minimum payment (which is now around £550). Checked my credit file and of course I have late payment fees against this. Silly me thought that as we had agreed a payment plan, I wouldn't have to the large minimum fee. I would like to buy a property in a year or so and obviously don't want these black marks on my file. I have been plowing as much as I can into the debt the last couple of months by selling everything I can get my hands on and making around double the payment we had agreed on, but the minimum payment hasn't come down much and I can't afford to pay the whole £550 to get rid of it. Any advice would be greatly appreciated.

Are you saying that the whole account is a default or that the account is up to date but there are defaults in the history?

In the case of only defaults in the history, for every month that passes the impact of those historical defaults gets less and less. A lender is likely to conclude that you went through a bad patch but you recovered. Keep up the payments and don't get any more defaults.

In the case of the account itself being a default, contact the lender and ask for the default to be removed. If they don't do that the horse has already bolted so arrange with the lender a payment plan you can afford and in that case you will need to supply them with an income and expenditure sheet. In 6 years the default will drop off your credit history.

DevilsBakBone

Do you currently have a Fixed Payment Plan in place?

If you do not and you are not covering the minimum payment, i would ask to understand how many days delinquent your account is. Days delinquency triggers all activity in a collections environment (missing the minimum payment).

Once you know the number of days delinquent, ask the number of dates before a default notice, termination letter and finally when the debt is written off to an agency.

With that information you should be able to better plan your escape to a debt free life and your goal of being a home owner.

Thanks.

msallen

Why are minimum payments on £4500 as much as £550? Depending on the particular card they would normally be a maximum of just over £100, but possibly far less. Is there more to the story you're not telling us?

SnowTiger

msallen wrote: »

Why are minimum payments on £4500 as much as £550? Depending on the particular card they would normally be a maximum of just over £100, but possibly far less. Is there more to the story you're not telling us?

I'd guess that's made up of late payment fees and interest since December.

OP, if I were you I'd contact Virgin and try to work out what happened to the payment plan you thought you were on.

You say you wrote to them and they agreed to a payment plan and to suspend charges. Was this response in writing? Do you have a copy of it?

If you're planning to get a mortgage you will probably have a problem. Even if Virgin had set up the payment plan and suspended charges, they would have reported AP (Arrangement to Pay) to the Credit Reference Agencies. With that recently on your files, I doubt anyone would lend you money because it indicates you can't service the debts you already have.

Monkeyballs

Hi Op,

Yup, I'd get in touch to confirm a breakdown of that £550 as it's huge for a minimum payment against £4.5k!

My guess is it's either A) fees which hopefully you can get removed as you had an agreement...or the difference between what you would have paid and what you've actually paid which they are now asking for as the agreement period has come to an end.

Or, is the outstanding balance now £550? Have your reduced payments reduce the balance to the point where they are larger than what the minimum would be if you weren't on an agreement perhaps?

MB

Getoffmycloud

Hi all, sorry for the delay in responding. We set up an agreed payment plan around six months of £72 a month on the £4,500 and they agreed to suspend all interest and charges, which they have done, but they have said that £72 a month isn't enough to cover the minimum amount due (I thought as we had agreed a payment plan then the £72 a month would be the minimum due - silly me!), but no, they told me it doesn't cover the minimum due so therefore over the course of the last six months it has gone up and up and I've only just realised. Hence the minimum due is now £500 odd and I guess will only continue to go up.

greenorange

I haven't got much to add apart from that you're unlikely to get a mortgage within your expected timeframe.

You've got a default from NatWest, and late payments from Virgin, which is likely to be enough to decline a mortgage outright.

bayzat

Try to get them to add the outstanding amount to your payment plan if possible.