Defaulting advice

Treguard

Hi All
This post goes against my morals, however having weighed up all of the options, and having  decent quality of life, unfortunately it seems the only course of action. Currently I have six credit cards, three of which I'm about to clear at the end of the month. My financial situation has changed due to my partner moving out and as such a LOT less available funds. I've calculated that if I could somehow keep the interest and charges frozen on those other cards, that I coudl clear them paying £104 a month over the next six years. i'm conscious though that they have had a payment arrangement at some point and so even after the account is settled, that marker would stay on for a period of time. Paying this amount though would mean that I would have very little quality of life and unable to travel to see my child, and so the only option I seem to have is to let those cards default and go onto a DMP (probably paying £15 a month across them). If I do let them default, would I likely have any issues with the other three credit cards with cleared balances? I know that I wouldn't have problems with my mortgage unless I applied for additional borrowing, but I'm happy to wait the six years for anything major to be done on the house.

As I said, I'm not proud of it, and I don't agree with it, but I need SOME quality of life for myself and my child. I'd appreciate feedback, and I appreciate that some will have a poor opinion of this course of action, it's quite understandable.

Thanks

[Deleted User]

Defaulting would be preferable to an AP, assuming the situation will be ongoing.

It's possible it will lead to the closure of your other accounts and will certainly restrict credit elsewhere, but that may not be a bad thing given your lack of funds.

Treguard

Deleted_User said:

Defaulting would be preferable to an AP, assuming the situation will be ongoing.

It's possible it will lead to the closure of your other accounts and will certainly restrict credit elsewhere, but that may not be a bad thing given your lack of funds.

Thanks for the reply. Just out of interest, do you know why mortgages tend to avoid risk of closure unlike credit accounts? The other three cards are Barclaycard (who I also bank with, and have always made more than minimum payment) Vanquis and Capital One. The Capital One card did have AP markers on it for six months. Do you think that I should try and prioritise closing that as soon as possible rather than leaving it active?

sourcrates

Over a quarter of credit card accounts defaulted in the first half of this year, mainly due to covid, so don`t beat yourself up about it, when its your only realistic option, then it makes perfect sense, after all, struggling to meet creditors contractural repayments when you know you can`t, is a pointless exercise, there comes a point you have to accept the inevitable.

Mortgages are treated differently to unsecured borrowing, as its essentially your home, the FCA regards keeping a roof over peoples heads as a priority, and as long as payments are maintained, creditors are not that bothered about your other borrowing.

Creditors do check your file from time to time, they may, or maynot close your other accounts if they see a default.

SpreadableToast

Treguard said:

I know that I wouldn't have problems with my mortgage unless I applied for additional borrowing, but I'm happy to wait the six years for anything major to be done on the house.

Are you currently on a fixed deal or SVR because if you're on a deal, you'll obviously kill your chances of remortgaging to a decent deal for some time and your existing lender may even refuse to allow you to remortgage onto one of their deals if they see a slew of defaults on there.

Of course, if it's the best thing to do you'll just have to take it on the chin, but it is something to consider.

Treguard

SpreadableToast said:

Treguard said:

I know that I wouldn't have problems with my mortgage unless I applied for additional borrowing, but I'm happy to wait the six years for anything major to be done on the house.

Are you currently on a fixed deal or SVR because if you're on a deal, you'll obviously kill your chances of remortgaging to a decent deal for some time and your existing lender may even refuse to allow you to remortgage onto one of their deals if they see a slew of defaults on there.

Of course, if it's the best thing to do you'll just have to take it on the chin, but it is something to consider.

I'm currently on a fixed deal that ends next June. When I was with my previous lender Natwest, I went through a period where unfortrunately some accounts had defaulted, and had managed to get onto further fixed rate deals (but without additional borrowing). Skipton seem a little less strict than Natwest.

Treguard

sourcrates said:

Over a quarter of credit card accounts defaulted in the first half of this year, mainly due to covid, so don`t beat yourself up about it, when its your only realistic option, then it makes perfect sense, after all, struggling to meet creditors contractural repayments when you know you can`t, is a pointless exercise, there comes a point you have to accept the inevitable.

Mortgages are treated differently to unsecured borrowing, as its essentially your home, the FCA regards keeping a roof over peoples heads as a priority, and as long as payments are maintained, creditors are not that bothered about your other borrowing.

Creditors do check your file from time to time, they may, or maynot close your other accounts if they see a default.

It's a shame as I was doing quite well too (paying £520 a month off the cards - they would've been fully paid in two years). Thanks for the reply

MinuteNoodles

SpreadableToast said:

Are you currently on a fixed deal or SVR because if you're on a deal, you'll obviously kill your chances of remortgaging to a decent deal for some time and your existing lender may even refuse to allow you to remortgage onto one of their deals if they see a slew of defaults on there.

I'd be very surprised if a mortgage lender refused to let an existing customer with a good payment record who was demonstrating financial distress from remortgaging, instead letting them go onto a higher SVR and making the problem worse. Bad mortgage payment record yes but not if they've not missed one.

The bar for remortgaging with your current lender is very low, they literally just have to tell you what the new repayments are and ask if you can afford them. Every time I've remortgage with Santander the conversation all done over the phone has gone:

"I'm due to remortgage, what can you offer?"

"These are the rates, this is the monthly payment"

"Yep that's fine"

"Can you confirm you can afford the new monthly payments?"

"Yes"

"Your new deal comes into effect on...."

And that's it, you don't even have to send in wage slips etc.

MovingForwards

Most lenders let you fix a new rate with them with a click of a mouse, no phone conversation required.

Head over to the debt free wannabe board for guidance on dealing with your CCs or ask @sourcrates to move your thread over.

Treguard

Thank you both for the replies. Just as a last question, is there a way to more quickly make a credit card default, or do I just have to miss six payments?

sourcrates

Treguard said:

Thank you both for the replies. Just as a last question, is there a way to more quickly make a credit card default, or do I just have to miss six payments?

How long is a piece of string, some creditors act faster than others, some will never default you, others will do so very quickly, you throw the dice and see what comes up basically, normal default criteria are, pay less than the min, but that has the risk of AP markers instead, or don`t pay anything, in which case its about 70-30 in your favour that they will default you.