Arrangement to pay effects

loopylou0605

Hello everyone 
Just seeking some advice. 

I have had my credit accounts on arrangement to pay since November last year ( 9 months) due to COVID related money issues. 

I am now in a situation where I can come off of these plans and start to pay the minimum payments again. 

My question really is, is it worth doing this as these AP’s will mess up my credit for many years to come or does it make more sense to default and then in six months have a clean slate. 

Worth noting that I’m on track to repay all debt by end of 2022 and was hoping to buy a house 2023 but was unaware how much harm AP’s caused  
 Thanks  in advance 

[Deleted User]

You wouldn't have a clean slate in 6 months, but in 6 years.

But a default may be the better option, if you can get it backdated far enough. 

sammyjammy

A default will remain on your account six years from the date it was made.  With your Arrangement to pay entries they will also state on your record for six years, I can see no reason if you have the funds that you wouldn't start repaying the agreed payments, in a couple of years some arrangements to pay that are two years old rather than a string of defaults that are only two years old seems preferable to me from a lending point of view.

loopylou0605

Thank you - was just trying to weigh up the better option. 

Obviously the arrangement to pays will be on my credit file for longer but hoping because lenders will see that it was a temporary situation it won’t cause as much harm as being on them for say 2/3 years ? 

Thrugelmir

If you are considering just paying the minimum amount requested. A mortgage maybe further away than you think. 

loopylou0605

Thrugelmir said:

If you are considering just paying the minimum amount requested. A mortgage maybe further away than you think. 

Even if the debts are repaid?

[Deleted User]

loopylou0605 said:

Thrugelmir said:

If you are considering just paying the minimum amount requested. A mortgage maybe further away than you think. 

Even if the debts are repaid?

It'll still show on your file as x number of months/years paying that, lenders won't just ignore that as you paid it off at the end i.e. you couldn't "cheat" the application process by suddenly paying off your debt and clearing the history - it remains on there for 6 years

kaMelo

loopylou0605 said:

Thrugelmir said:

If you are considering just paying the minimum amount requested. A mortgage maybe further away than you think. 

Even if the debts are repaid?

I think the point they were making was, you've had to take an arrangement to pay with lenders because you couldn't keep up your minimum payments, now your in a better place yet can still only afford minimum payments on your debts and considering whether a default would be a better option

Given that information iIt would seem highly unlikely that you can repay all your debts by 2022. If you can then you should be making more than the minimum payments now and not considering a default.

What a lender will see is someone who is/has been making minimum payments, has little to no capital behind them and no backup plan in case of financial shock.  Mortgage affordability is tested not only on the current interest rates and what you can afford now, but what would happen if they were to rise 2 or 3 % (I can't remember which) combined with other associated costs increasing, could you afford everything then?
Based upon your recent history, in the absence of a new job/large pay rise the answer would appear to unfortunately be no, you couldn't.


PS. In answer to your original question, default or AP makes little difference as they are both viewed negatively in equal measure. The only real difference is that a default is six years from default date, an AP is six years from when it ceases to be in place therefore the default usually drops off first.

The correct order is to default and then arrange a payment plan however most lenders would have you doing it the other way around.

loopylou0605

Makes sense. Thanks for responses.