High interest loans

Legacy_user

What is the exact legal situation is if you default on personal loans?

sourcrates

ruhe wrote: »

Could anybody here advise me here of what the legal situation is if you default on credit card and personal loans?

Here are some specific questions:

1. Are they allowed to continue to charge horrendous interest rates?
2. Will they consolidate your debt into a manageable interest rate payment?
3. What sort of impact does it have on your credit file?
4. Is there anyway you can negotiate with them whilst not having it effect your credit file

Simply put my situation is as follows:

Recently purchased property for cash as I never buy houses using mortgage

On this occasion I did something I told myself I'd never do and that was to take out credit card debt and a personal loan because the house I bought needed more work doing to it than I thought

The only thing that puts me in a bad spot is that I'm self employed and therefore the banks seems to charge me a higher level of interest than they would if I had a regular job 10% on personal loans and 26% on credit card loans

It's the credit card loans that are really gnawing away.

If I run out of cash before the project is completed I will default on my loans. If this happens can the bank take my property even though it's not offered as collateral?

Hi,

1. Are they allowed to continue to charge horrendous interest rates ?
Answer, Yes they are, it would of been made clear in the credit agreement you signed.

2. Will they consolidate your debt into a manageable interest rate payment?
Answer, This is possible, but not a very good way to proceed, the debt tends to be run up again you see, and you end up with twice as much debt as before, not recommended.

3. What sort of impact does it have on your credit file ?
Answer, Late payments or defaults will be recorded on your credit file for up to 6 years.

4. Is there anyway you can negotiate with them whilst not having it effect your credit file
Answer, The banks may do a 6 month temporary arrangement for you, but anything except the full contracted payment will effect your credit file yes.


I assume the loans were all unsecured therefore your house is not at risk pursay, but if you were taken to court for these debts, even if you agreed a repayment plan, they can still put a charging order on your house.

This does not automatically mean anything, you have various chances to put your side of the story over, and orders for sale are very rare, so whilst it exists as a possibility, in reality, its unlikely to happen.

It sounds like a debt management plan may be appropriate for you, get some advice from any of the free debt advice charities in my signature.

sourcrates

ruhe wrote: »

I thought that banks stopped the accruing of interest on a loan that the borrower has defaulted on? Is this not the case then or is it dependent upon the particular lender?

If you default then yes they do, as the terms of the original agreement will of been broken, the debt is frozen at whatever level its at when they default you, I note now you did say default originally, apologies for that.

John_Jones

Why did you not fund the property with a mortgage? I am paying 1.3% on hundreds of thousands of pounds, which is about right nowadays. That costs me only a few hundred pounds a month in interest.

poppy10_2

ruhe wrote: »

Recently purchased property for cash as I never buy houses using mortgage

Hindsight is a wonderful thing, but it would have been better if you were now paying off a mortgage at 2% and kept your cash for the project, rather than taking off loans and credit cards at 10-30%

Red-Squirrel_2

You can get loans and credit cards without any income?

John_Jones

ruhe wrote: »

It was a large and expensive house and I don't think I would have gotten a mortgage for what I wanted to do you see so the only way to aquire the property with cash was to use this type of finance and as you say 10 - 30 pips

I know it's my own decisions that have me in this situation and I knew all the risks before hand. I knew it would be a close run thing but .......... maybe I wish I hadn't bought this house now and borrowed so much money

There are options I just have to sift through them. Thanks for your thoughts

It does sound like a terrible business plan, borrowing at such high rates and depending on everything going right to service the debts. I am not clear when you wrote your business plan how you factored in these interest costs but are still struggling.

As others have asked, if you have no income how did you get loans, and how are you servicing them?

John_Jones

ruhe wrote: »

I'm not struggling but I will struggle unless I take some decisions now. I mean this conversation is about pre-empting problems if that makes sense.

I did factor in everything in my business plan but you can't factor in things in building and when buying a house.

You don't know if the electrics are faulty or the plumbing is good or the floor is rotten or not etc etc so these are the unexpected variables and in this instance they went against my good fortune and turned out to be more expensive than anticipated unfortunately

You are supposed to look at the house first, and see which things are going to need replaced. Those which you cannot see, you assume that they do need to be done. I am not sure why you say that you cannot factor them in, as of course uphou can. You know how much wiring costs,,or plastering, or plumbing, and you include contingency planning for that.

How muc headroom did you leave yourself for issues like this?

theoretica

Have you spoken to a mortgage advisor or are you just assuming noone would give you a mortgage?

Luckystepho

Is there any type of temporary bridging loan that may be available?