Effect of large unsecured loan v default

DrWatson1

Hi,

I'm currently negotiating for settlement of a large, unsecured debt (£26k). The debt was not defaulted this when i originally went into a DMP 9 years ago.

I'm now negotiating F&F settlement on the loan. I have asked for the default to be backdated to the original date I entered the DMP, but if they do not agree, how would a default on my account affect my credit rating when compared to a £26k debt?

[Deleted User]

I'm not sure I understand the question.

A £26k loan shows significant indebtedness. Depending on your income, lenders may be concerned about your ability to handle further credit.

A defaults shows lenders that you couldn't meet your obligations.

The two things aren't really comparable.

Ben8282

I thought a DMP was supposed to include all debt?
What is the current status of this loan?
Have you been keeping up payments for the last 9 years? if yes, then how long was the original term?
If no, then what is the current status of the loan on your credit files?

DrWatson1

The DMP included this debt, but the lender did not default the account so it's currently in arrears as I have been paying back a reduced amount.

I am negotiating to potentially settle this debt, but the lender has said if we agree a deal, they will default the account, and mark it partially settled.

I would like to go for a remortgage over the next few months, so my question is would a default be worse from a lenders point of view than £26k of unsecured debt that is in arrears?

System

Ben8282 wrote: »

I thought a DMP was supposed to include all debt?

No, only those who agree to be in it. IVAs and DROs include all debt but not DMPs.

xebruary

DrWatson1 wrote: »

I would like to go for a remortgage over the next few months, so my question is would a default be worse from a lenders point of view than £26k of unsecured debt that is in arrears?

Yes, a default would be worse, but a £26k debt in arrears is not desirable either, so I don't think you'll find you have the best remortgaging options anyway.

You say they are marking the debt in arrears - do you mean an arrangement? It seems odd that you can stay in arrears for 9 years without them writing off or collecting the debt or marking it down as an arrangement.

DrWatson1

Yes, I have an arrangement to pay through a DMP and they have frozen the interest, although at the moment it's only a token amount.

I believe they should have marked the debt as default when I entered the DMP as my other creditors did, but for reasons known only to them, they didn't.

Incidentally, If i did settle the debt, would they *have* to mark the account as defaulted? I appreciate they will mark it as partially settled, but if they are going to apply a default now, one could argue they should have applied it several years ago...

[Deleted User]

They wouldn't have to mark it as defaulted, just because you settle. In fact, it makes it more unlikely.

I would be looking to get the default applied for the right date, which will then cause it to fall off your file completely.

DrWatson1

Okay, thanks for the information - Would you be looking to get the default applied to the right date, even though they have yet to default the account?

[Deleted User]

Yes - to within 6 months of when you defaulted.