Enormous Credit Card interest

GPaulo

Hi, I'm self employed and about a year ago a lot of my customers paid me so late that I lost first one then all of my promotional rates on credit cards. Over the last year I've used the cards to survive, making things worse.

I know owe around £20k in total to three credit card companies, all at excruciating rates (one of them is 29.9%). I'm paying about £500 a month just in interest. Except I've actually missed a couple of payments now.

My friend has offered to lend me £7000 so i'm thinking to offer this as full and final settlement of the highest interest card.

Would that be sensible? Given the high interest rates, how much might I be able to offer as full and final settlement?

£7850 Barclaycard
£3100 Nationwide
£8550 MBNA

I've heard suggestions that because the interest rates are so high, I might be able to offer £5k to MBNA and £2k to Nationwide for example?

Ultimately I'd like to move property and get a new mortgage to pay off the remaining card debt. Would these settlements for reduced amounts harm that aim?

My mortgage is £89k 3.69% and my neighbours place just sold for £175k so I'd hope to get at least that for my place.

Thanks in advance,
GP

sourcrates

Hi,

Are the debts defaulted and sold on to debt collectors ?

If not I doubt they will entertain any offers, they have no reason too, as you are still required to make regular payments as per your contract.

It's only after the relationship between you has broken down, and defaults issued, that settlement offers would be entertained.

GPaulo

I had a default notice for MBNA because I was late paying.

FinallyDebtfree2017

I would call them and kindly and politely ask whether they are able to reduce rate, given that you are unable to repay them and rates are crippling

debbie_debt

Is there a possibility of remortgaging your current property in order to release some equity and pay off the debts?

I would agree with sourcrates that they're unlikely to accept a full and final settlement. I considered this when I received a lump sum a while ago - a debt advisor on here advised me it was highly unlikely to be accepted unless you've been defaulting for quite a while and the accounts are clearly not going to be paid. In those circumstances, the CC company will take what they can get from you. But please don't be tempted to intentionally leave the accounts to continually default in order to get them to accept the offer! This ruins your credit rating and you'll find getting another mortgage etc very difficult.

GPaulo

I tried negotiating but didn't really expect they'd do much and got no joy.

StepChange think they might freeze interest.

I don't know if I can remortgage with such a poor credit rating. Affordability is ok they'll lend me enough and it would be hugely advantageous but don't know if they'd lend to me. Maybe more chance because it's secured debt and low loan to value ratio?

chevalier

http://www.stoozing.com/calculator/soa.php


well done on getting started. have a look at the link above and think about doing a budget through to see what you can realistically afford. ie putting decent amounts in agains food and heating etc. If you can't then afford the credit cards then maybe a DMP would work for you. of course it does affect your credit rating.
good luck
chev

glentoran99

debbie_debt wrote: »

Is there a possibility of remortgaging your current property in order to release some equity and pay off the debts?

I would agree with sourcrates that they're unlikely to accept a full and final settlement. I considered this when I received a lump sum a while ago - a debt advisor on here advised me it was highly unlikely to be accepted unless you've been defaulting for quite a while and the accounts are clearly not going to be paid. In those circumstances, the CC company will take what they can get from you. But please don't be tempted to intentionally leave the accounts to continually default in order to get them to accept the offer! This ruins your credit rating and you'll find getting another mortgage etc very difficult.

On the contrary if you are stuggling to make payments and don't have enough to live on then that would be one of the better options, as soon as you agree reduced payments your credit file is shot anyway, The sooner they are defaulted the better.


If they agree to freeze interest you will likely be on an arrangement to pay which will stay on your file 6 years after its paid off, a default its gone 6 years from default paid or not


As for not getting a mortgage again that isn't true. I have literally just remortaged, a 125% mortgage at that, I have 3 defaults on my credit file I was in a similar situation to the OP in 2011 and now im back on track

Helvetica_Van_Buren

You initially cited late-paying customers as the reason you had to use your credit card, but then when those customers paid surely this should have got you back in red?

What I'm getting at is if you're self-employed and in this much debt, I don't see how your situation is going to be any different once you've settled these debts.

Resolving matters with creditors is fine but it's not addressing the root issue of you spending more than you earn.

sourcrates

GPaulo wrote: »

I had a default notice for MBNA because I was late paying.

Yes but you are still governed by the terms and conditions of your credit card agreements, so you are liable for the cash balance, plus any interest and charges added, this will continue regardless, until you break the terms of your agreement by not paying.

Only after the account has defaulted, been dragged through the debt collection process, and sold on to a debt collector, could you possibly hope to get the settlement you are after.

Now asking a creditor to stop interest and charges, is another track altogether, if they agreed, they would expect monthly payments, not a lump sum, if you made a lump sum payment, its possible they would reinstate the interest again, but i see your thinking on this.

SkyKyo

Why are you paying interest? I have £8000 all on 0% credit cards if you could use the 7k to pay off a credit card so you reduce one of your debtors and debt consol using balance transfer on 0% the rest you would be able to pay £600~ per month off your capital