Would this be considered "debt"? Will this affect mortgage application?

neo2020

muhandis wrote: »

Having worked previously in the accounts department of a London based college catering primarily to international students, the arrangement you describe above seems oddly informal for a "debt" of £10,000 and unlike anything I've seen while working there.

Firstly we would never enter into a long term debt repayment plan with an international student as their continued presence in the UK could not be assumed.

Secondly, we would not enter into a long term debt repayment plan with a student without -
- checking your credit report
- documenting a proper repayment agreement (for the whole amount) with admin fees, late fees or interest added on to the principal. (interest free debt of £10,000 for a period spanning 27 years is unfathomable)
- sending an annual statement detailing payments made, debt outstanding, etc
- periodic offers to discuss a 'Full and Final' payment to repay the debt

...

I'd wager that the "debt" (if it ever existed) has been written off a long while ago in their accounts while your £30 just goes into a suspense account every month.

Thank you for your detailed answer and insider's perspective.

First of all, just to give more context when I went in for that meeting, they asked me to bring my bank statements with me. What I remember from the meeting is they were very aggressive initially but were visibly shocked to see how little money I had/was earning from my statements and backed off a bit.

I also remember quite clearly saying to them that if I am forced to go back home, there is absolutely no chance I would be paying it back, even if I had wanted to, simply because the job I would get in my country with no degree and given the difference in income levels would never be enough. They didn't seem surprised by this and pretty much accepted it.

Now, the plot thickens:

I have been digging through an old e-mail account which I was using for communications with them, it seems that the information I provided above was not complete.


In 11/2006, after the meeting they sent me the document I quoted before. It showed 12 monthly payments of £30 and then a total of £10436. It also said that failure to make any of the monthly payments would result in the total being due immediately.

Then, in 04/2007 they e-mailed me a "Statement" that looks like this (I removed personal info):



What is worrying is that somehow after 5 months of me making payments, the amount was higher than before... Would it not be illegal to agree an instalment plan with someone that increases their debt? Another possibility is that the large amounts 2k and 8k are fees for the subsequent year added in error? Who knows.

Also, I notice that the £30 seems to be broken down into 3 separate payments of 23.78, 6.15 and 0.07. Is it possible that instead of arranging for that £30 to be paying off the "capital", they broke it down into capital, interest and penalties? God only knows which of those figures is the capital too!

They never, ever said anything about interest or penalties or anything of the kind. They just said "how much can you pay towards this amount", "I said "well, I can't do more than £30 a month" and they, looking visibly relieved, "Ok, that's something at least" and wrapped up the meeting. Obviously, all of this is from my memory of 10 years ago of something I didn't particularly want to remember. But certainly, they never, ever specifically pointed out to me that I would be liable for interest, let alone penalties or that my "debt" would be growing as a result.

We also never agreed a specific payment plan. It was not £30 a month for 27 or 29 or 30 years, it was just £30 a month.

Then I found another e-mail from early 2010 apologising for a technical error that resulted in one of the direct debits being taken a few days late (lol). In the same e-mail, the person also asked if I was able to increase the monthly payments. I replied saying "no" and that was the end of it.

I haven't heard anything from them for almost 7 years.

muhandis wrote: »

Given than you have been here for more than 10 years, I assume that you have acquired citizenship and are no longer on a points based visa. If that isn't the case then please ignore what I said.

Out of interest, was this a private university/college?

Yes, I've been a British citizen for 8 years now. This was one of the biggest universities in the country.

My concern with the suggestion of cancelling the DD is that whatever agreement they seem to think we have (I don't remember signing anything but equally, I doubt they would have just let me walk out of there without any written commitment, right?), by cancelling the DD I am in breach of that.

At which point, they can start to act in the way that you are suggesting they should have acted which is to credit check me, pursue me for the full amount, agree a proper instalment plan etc. While I am by no means wealthy, certainly I am not in as bad a financial position as I was at the time and should we complete on the purchase, I can hardly claim to have no money at all!

From your experience, how likely is it that I can successfully challenge the original amount, the fact that they've been charging me interest/penalties (if they have) without explaining it to me or simply settling for a smaller amount, perhaps repayable over time in bigger instalments?

Or is there something else I can do? Or do I just let sleeping dogs lie?

muhandis

Thanks for the extra details. Things are a bit clearer now.

1. From your statement it does look like the £30 repayment is split across 3 categories. As you say, hopefully the largest is capital and not interest.

2. Given that they're a big university, sent you a statement and do communicate occasionally, it does look like there is a formal agreement in place. Maybe you don't remember the exact details of how things panned out, that's not unusual given that it must have been quite a traumatic period in your life.

3. As I mentioned in my earlier email, it is very unlikely that they would agree to an interest free debt repayment plan that spanned more than 27 years (how long it would take to repay £10,000 through monthly £30 DDs). The base rate in 2006 was almost 5%. Assuming that that was what they set for your debt, that would be £500 in a year (for the initial amount of £10,000) which is more than the £360 you would have repaid over a year.

As for the way forward, the options you have are -

Keep the DD undisturbed. Write to the university (recorded signed for with a scanned copy emailed to the email address you have for them) asking them politely for details of the agreement that you have for repaying this debt (attach a copy of the latest statement you have), specifically how long it will take, how your monthly repayment is allocated to the principal amount and whether they are charging you any interest, penalties, fees, etc and what they are. Mention that from your memory of the meeting, there was no discussion of anything in addition to the principal. If they don't reply after a month, send a reminder. Once you have the details or they don't reply, contact a free debt advice charity https://www.moneyadviceservice.org.uk/en/tools/debt-advice-locator to see what they say about what you could do to challenge the terms of this debt if you are sure they were never agreed to by you.

OR

Let sleeping dogs lie. If you can't be bothered with the above and can absorb £30 a month leaving your bank account to service this debt for the foreseeable future, then let it be.

Personally I would choose the first option just so I know what it is that I've been signed up to, how much of the principal remains to be paid, negotiate a lower interest rate and crucially whether the university is planning to milk me for life on terms that I've not signed up to. But of course, that is me talking as someone who is removed from the actual event that triggered this. You might just want to forget about the whole thing, which is understandable as well.

Good luck.

neo2020 wrote: »

From your experience, how likely is it that I can successfully challenge the original amount, the fact that they've been charging me interest/penalties (if they have) without explaining it to me or simply settling for a smaller amount, perhaps repayable over time in bigger instalments?

Or is there something else I can do? Or do I just let sleeping dogs lie?

neo2020

muhandis wrote: »

As for the way forward, the options you have are -

Keep the DD undisturbed. Write to the university (recorded signed for with a scanned copy emailed to the email address you have for them) asking them politely for details of the agreement that you have for repaying this debt (attach a copy of the latest statement you have), specifically how long it will take, how your monthly repayment is allocated to the principal amount and whether they are charging you any interest, penalties, fees, etc and what they are. Mention that from your memory of the meeting, there was no discussion of anything in addition to the principal. If they don't reply after a month, send a reminder. Once you have the details or they don't reply, contact a free debt advice charity https://www.moneyadviceservice.org.uk/en/tools/debt-advice-locator to see what they say about what you could do to challenge the terms of this debt if you are sure they were never agreed to by you.

OR

Let sleeping dogs lie. If you can't be bothered with the above and can absorb £30 a month leaving your bank account to service this debt for the foreseeable future, then let it be.

Thanks a lot.

If the full mortgage application is approved and we are able to complete the purchase, I will let it lie until we remortgage 2 years down the line. At that point we would hope if house prices continue to go up and with a small amount of overpayment, we can get down to 75% LTV and maybe fix for 5 years.

Once that is in place and my credit score becomes less important I will ask the uni for all the documentation related to the case and take it from there.

Thank you for the help and advice.

Thrugelmir

In completing a mortgage application you sign a declaration to the effect that the information supplied by you is correct. Failure to declare is regarded as fraud. As financial relationships are built on trust. With no trust there can be no relationship. If you are prepared to lie, what else may be incorrect.

Lenders share data as no one wants to deal with a bad apple. All CML members belong to National Hunter which is run on their behalf by Experian.

http://www.nhunter.co.uk/

neo2020

Thrugelmir wrote: »

In completing a mortgage application you sign a declaration to the effect that the information supplied by you is correct. Failure to declare is regarded as fraud. As financial relationships are built on trust. With no trust there can be no relationship. If you are prepared to lie, what else may be incorrect.

Lenders share data as no one wants to deal with a bad apple. All CML members belong to National Hunter which is run on their behalf by Experian.

http://www.nhunter.co.uk/

I love these forums but if there is one thing that annoys me it's moral higher-grounders like you who come in without understanding the situation in any way with comments like this.

If you had actually read this discussion, you would have seen that I explained the situation in FULL DETAIL to my mortgage advisor as soon as I was told I need to do this in this discussion.

All the information I have supplied to date IS correct and if the bank asks me for more information, I will obviously provide it.

Furthermore, this arrangement is not shown on my Experian report, something I also mentioned in the discussion above.

Thank you for your invaluable input though.

neo2020

neo2020 wrote: »

I love these forums but if there is one thing that annoys me it's moral higher-grounders like you who come in without understanding the situation in any way with comments like this.

Oh wait, I just realised you're the same person who did this in another thread where I asked for advice.

Nevermind, I will just ignore you from now on.

muhandis

Oh just ignore him. He does this everywhere, piping up to judge/label people's choices and condemn them with very little (if any) helpful advice that pertains to the original question.

neo2020 wrote: »

I love these forums but if there is one thing that annoys me it's moral higher-grounders like you who come in without understanding the situation in any way with comments like this.

If you had actually read this discussion, you would have seen that I explained the situation in FULL DETAIL to my mortgage advisor as soon as I was told I need to do this in this discussion.

All the information I have supplied to date IS correct and if the bank asks me for more information, I will obviously provide it.

Furthermore, this arrangement is not shown on my Experian report, something I also mentioned in the discussion above.

Thank you for your invaluable input though.

neo2020

muhandis wrote: »

Oh just ignore him. He does this everywhere, piping up to judge/label people's choices and condemn them with very little (if any) helpful advice that pertains to the original question.

Good to know. He's on my ignore list from now on

You on the other hand, have been very, very helpful!!!

Thrugelmir

neo2020 wrote: »

I love these forums but if there is one thing that annoys me it's moral higher-grounders like you who come in without understanding the situation in any way with comments like this.

If you had actually read this discussion, you would have seen that I explained the situation in FULL DETAIL to my mortgage advisor as soon as I was told I need to do this in this discussion.

:wave::wave::wave:

Have no concerns. I won't waste my time any further.

Thrugelmir

muhandis wrote: »

Oh just ignore him. He does this everywhere, piping up to judge/label people's choices and condemn them with very little (if any) helpful advice that pertains to the original question.

:whistle::whistle::whistle::whistle:

Please put on your ignore list.