missed loan repayments

jpr1312

Can anyone tell me if a bank is under any obligation to reschedule loan repayments?

Our daughter (against advice) took out a loan with her bank, she is a student at university and works part-time. As predicited, she has run into difficulties meeting the repayments. She did what we thought was a rather sensible thing and went to the bank to explain her situation and see if they would reschedule the repayments and they refused!! As a result she is now 2 or 3 payments behind and would think her loan will be referred to a debt collection agency before too long. We just can't see the bank's logic.

Anyone have any thoughts/suggestions????

jonesMUFCforever

They are unable to do anything until she is 3 payments in arrears when then the bank's collection services kick in.
Short term they will probably re-schedule the loan but as a defaulter: and this will affect her future credit rating.

CLAPTON

i would suggest her parents help her out ..just this once.

jpr1312

Thanks for the suggestion, we have every intention of helping her out, but as this is the latest in a very long line of 'helping out', it's getting just a little bit tiresome now!!! We had hoped she would have learned by now from previous 'hiccups' - but maybe we're being too optimistic after only 21 years!!!!

CLAPTON

Well, if its not the first time then maybe helping isn't the answer.

If you don't help the likely scenerio is that after 3/4 missed payments they will default her account.

This will probably be recorded on her credit record which will be trashed for six years. This will make it very difficult if not impossible to get credit including loans, CC and even contract phones. If she wants a mortgage this will make it a lot more difficult and she may well have to pay a higher rate of interest.

Once they have defaulted her account they may well agree a lower rate of repayment.
You may want to advice her about the consequences of her actions but maybe not being able to get credit again until she's 27 may be for the best.

A very difficult call for any parent.

jpr1312

Yes it is a difficult call, of course we don't want to see her in financial difficulties, especially when she would end up with a bad credit rating (maybe not a bad thing as you say!!). We had thought we would pay her missed payments, let her take over the loan repayments again and hope she really has learned this time and doesn't miss anymore???!!!! We can but hope, though if it does happen again, that is the time she will find herself without our support!!! Thanks again.

suzy83

Why dont you try what i did with my loan and credit card, I wrote them a letter explaining my financial difficulties and ask for a reduce payment plan or ask them to freeze the interest on the loan.

Give it a go, i did and they are no accepting lower payments.

Good Luck x

jpr1312

Thanks for that, but I think that was what she was trying to achieve when she went to the bank and asked them to reschedule the loan. I'm not sure if she asked about freezing the interest though so I will pass that on.

Good luck to you too, hope you've got a line through all those numbers soon and can truly say you're debt free - it'll be a great feeling!!!

Thanks again.

Ginene_2

Tell her to try paying something on it. Sometimes banks will take that into consideration.

Debt_Free_Chick

jpr1312 wrote: »

Can anyone tell me if a bank is under any obligation to reschedule loan repayments?

Our daughter (against advice) took out a loan with her bank, she is a student at university and works part-time. As predicited, she has run into difficulties meeting the repayments. She did what we thought was a rather sensible thing and went to the bank to explain her situation and see if they would reschedule the repayments and they refused!! As a result she is now 2 or 3 payments behind and would think her loan will be referred to a debt collection agency before too long. We just can't see the bank's logic.

Anyone have any thoughts/suggestions????

I assume this is a straightforward personal loan and not a "flexible" loan - it's likely to be the former, but you might want to check the paperwork.

If it's a personal loan then your daughter signed an agreement with the bank - they would give her £X,000. In return, she will pay £Y.00 per month, every month, on a certain day for Z months.

The bank's attitude is one of "We stuck to our side of the agreement, now we expect you to do the same by paying each month's instalment".

In addition, local staff have no authority to "come to an arrangement" these days - that authority is usually with some central department somewhere.

I guess your daughter has just missed 2-3 payments, but is now paying the regular monthly amount? As far as the bank is concerned, she can afford these repayments. If she had a history of failed payments, then that might suggest she couldn't afford them and a different process would kick in. As ejones999 said, 3 missed payments rings alarm bells and the "central department" would be alerted.

They will firstly try to get your daughter to make up the missed payments - they might reschedule the loan, eventually, but this won't be their first offer. They tend to adopt an attitude of "Can pay, so do so!!" (and, afterall, your daughter appears to them to be able to afford the repayments).

However, she is now with the debt recovery department and whilst they can come to arrangements to pay, they can be tricky to deal with and the account is likely to be defaulted.

So ... to answer your question, most loan agreements can not be rescheduled - they are firm agreements "cast in tablets of stone".

Once three payments are missed, the account will probably be defaulted and the matter put in the hands of debt recovery/collection. At this point, it may be possible to come to an arrangement over paying the arrears. This might be by rescheduling the loan - or some other method.

Beware of "loan rescheduling". This often involves taking out a new loan to pay off the old one + the arrears and you can end up paying more out by way of interest.

What should you do? Difficult one - it's not for us to tell you how to deal with your daughter and, in any event, you have to balance the practicalities with emotion. But for what it's worth, I think it's time for tough love. She needs to operate "in the real world" and not one where Mum bails her out because she's spent her loan repayments on ...... :rolleyes: what?

I don't need to know, but you might want to find out as it could affect your decision!

HTH

inmypocketnottheirs

Hi, my tuppence worth:

You need to explain to your daughter, by showing her threads on here, exactly what a 'Default Notice' does to a credit report and one's credit file. If she is less than three months in arrears, and with your help the payments can be caught up, then she will have, by the skin of her teeth avoided getting a default notice. However, once the default notice has been served and sits on her credit file, she will not be able to get any meaningful sort of finance at any decent rate of interest. She's only 21, and six years is a long time in someone's life to live in financial exclusion.

AA default notice is as bad, to any one in the banking/finance/credit industry as a county court judgement. With a default notice on a credit file, one is a financial leper. It means no credit cards, no loans, no mortgage (at a sensible rate anyway), no car insurance with monthly instalments (More Than won't ((or wouldn't)) accept anyone with a default) and even difficulty with getting a bank account with a debit card and/or cheque book.

I know after 21 years it can get tiresome, and it seems as if she just wont listen to reason, but this may just be the last chance she gets before putting herself on a really slippery downhill slope that could put her financial future in jeopardy.

Sorry if this sounds harsh, or even extreme, but there are many others here that can endorse my experience with having a poor credit file. Fortunately I have now got out of all my financial problems and I my credit file is now pretty straight. But I (and my wife) have suffered six years in a financial wilderness, and it is, frankly, something that does need to be avoided.

Hope this helps...... and good luck!