Repaying loan arrears

AlanB1979

Good morning!

As with many folks I had to take a payment break on my car finance repayments during covid as I had lost my job. This led to several months of arrears building up, about £1000 total arrears. These arrears now need to be paid but I cannot afford to pay them just now, I can still manage the usual monthly loan repayment however. 

To explain, I have set up a small business and so I receive the new enterprise allowance for the first year of business which just about covers my rent, bills and loan repayments, I cannot afford the increase to cover the arrears currently. 

As I attempt to build my business I am not paying myself so I am relying solely on the New Enterprise Allowance. 

I have just over three years left on the term of the loan. 

What are my options here as I can't afford to lose the car as its needed for work, if I lose the car then I will have to close my business as I need it to ge tot work, go to suppliers etc.

As mentioned there are three years left on the loan so surely if its all paid up within that term then thats all that matters or am I being a bit naive here?

Any help/advice would be greatly appreciated!

Thanks

[Deleted User]

Yes, you're being a bit naiive. What matters is what the lender wants and the terms of the agreement.

Speak to them to regarding your plans to repay the arrears. They may accept a longer repayment plan if you're lucky. If they don't, then they will default the loan and take the car back.

Brie

It's possible that if you can scrape even an extra £1 a month that may be enough for you to appear willing to clear the arrears with the assumption that the extra will increase asap as your business builds.

The lender may decide that interest will need to accrue or even be increased to match their increased costs of administering the loan.  But that will for them to decide ultimately.

Thrugelmir

Speak to the finance company and determine your options. 

EssexHebridean

Also put together your SOA (link in my signature) as that will help you to establish how much you can afford to start paying back. It may help you to post it into the Debt Free wannabe board here for us to take a look and see if we can help you identify any savings that can be made in your budget. 

AlanB1979

Thank you all for your replies. 

Deleted_User said:

Yes, you're being a bit naiive. What matters is what the lender wants and the terms of the agreement.

Speak to them to regarding your plans to repay the arrears. They may accept a longer repayment plan if you're lucky. If they don't, then they will default the loan and take the car back.

As there is still over three years left on the loan I will be able to pay off all of the loan in full within the term agreed at the start. What I can't do right now is pay the additional £100 per month on top of the £200 per month I am currently paying them. 

I would be in a better position to pay a bit more in a few moths but right now I can't pay the additional £100 on top of the £200.

Brie said:

It's possible that if you can scrape even an extra £1 a month that may be enough for you to appear willing to clear the arrears with the assumption that the extra will increase asap as your business builds.

The lender may decide that interest will need to accrue or even be increased to match their increased costs of administering the loan.  But that will for them to decide ultimately.

I will ask them when I speak with them tomorrow.Thrugelmir said:

Speak to the finance company and determine your options. 

Speaking with them again tomorrow but based on previous conversations, my options are ltd. 

EssexHebridean said:

Also put together your SOA (link in my signature) as that will help you to establish how much you can afford to start paying back. It may help you to post it into the Debt Free wannabe board here for us to take a look and see if we can help you identify any savings that can be made in your budget. 

I have already filled out a few of these forms, my monthly income does not cover all my expenditure currently. I eat at work (food biz) so I don't have any food bills at home. I have cancelled all my subs such as audible, Spotify, Netflix etc. 

One thing is that I have my business insurance through the same company so should they decide to call in the loan and reposes the car then I would have to close the business down and they will in fact lose out on more income as I will have to cancel my business insurance with them. 

Anyway I shall speak with them tomorrow and see what can be done!

Thanks for the advice so far, much appreciated!

Sncjw

AlanB1979 said:

Thank you all for your replies. 

Deleted_User said:

Yes, you're being a bit naiive. What matters is what the lender wants and the terms of the agreement.

Speak to them to regarding your plans to repay the arrears. They may accept a longer repayment plan if you're lucky. If they don't, then they will default the loan and take the car back.

As there is still over three years left on the loan I will be able to pay off all of the loan in full within the term agreed at the start. What I can't do right now is pay the additional £100 per month on top of the £200 per month I am currently paying them. 

I would be in a better position to pay a bit more in a few moths but right now I can't pay the additional £100 on top of the £200.

Brie said:

It's possible that if you can scrape even an extra £1 a month that may be enough for you to appear willing to clear the arrears with the assumption that the extra will increase asap as your business builds.

The lender may decide that interest will need to accrue or even be increased to match their increased costs of administering the loan.  But that will for them to decide ultimately.

I will ask them when I speak with them tomorrow.Thrugelmir said:

Speak to the finance company and determine your options. 

Speaking with them again tomorrow but based on previous conversations, my options are ltd. 

EssexHebridean said:

Also put together your SOA (link in my signature) as that will help you to establish how much you can afford to start paying back. It may help you to post it into the Debt Free wannabe board here for us to take a look and see if we can help you identify any savings that can be made in your budget. 

I have already filled out a few of these forms, my monthly income does not cover all my expenditure currently. I eat at work (food biz) so I don't have any food bills at home. I have cancelled all my subs such as audible, Spotify, Netflix etc. 

One thing is that I have my business insurance through the same company so should they decide to call in the loan and reposes the car then I would have to close the business down and they will in fact lose out on more income as I will have to cancel my business insurance with them. 

Anyway I shall speak with them tomorrow and see what can be done!

Thanks for the advice so far, much appreciated!

Still post it other people may be able to help find a gap in the your finances or ways to help. 

mcpitman

Hi, call them today and offer £50 per month as opposed to the £100.

That amount, over 3 years, should pay any interest accrued due to arrears too.

As a final option, would they let you run the loan on standard payments and have a bigger "balloon payment" at the end?

AlanB1979

HI folks, apologies for the delay coming back to this, working solo all week so no time to do much else!

Anyway below is my SOA. You will see that my income (New Enterprise Allowance only) falls well short of my outgoings. I have managed this the last few months by selling off some stuff that I don't use anymore, bike, laptop etc. All numbers have ben rounded up. I live in a shared house so bills are all split evenly. Some things to point out, I spend very little on food currently as I started a food biz so im surviving on coffee, fruit and some food from work. Expenses such as diesel, parking etc I expense through my business.

I approached a debt advisory service but they were useless, they told me to default on the credit cards instead if trying to get a consolidation loan. 

I have one option, I do have pre set up expenses I can claim back, about £1,500. I am aiming to do this asap, will prob be the new year before this can be done though. 

Any advice is greatly appreciated!

Statement of Affairs & Personal Balance Sheet

Summary

Monthly Budget Summary	Amount(£)
Total monthly income	1,011
Monthly expenses (incl. HP & secured loans)	821
Available for debt repayments	190
UNsecured debt repayments	501
Amount short for making debt repayments	-311

Personal Balance Sheet Summary	Amount(£)
Total Assets (things you own)	0
Total Secured & HP Debt	-0
Total Unsecured Debt	-17,160
Net Assets	-17,160

Income, Expense, Debt & Asset Details

Income	Amount(£)
Monthly income after tax	1011
Partners monthly income	0
Benefits	0
Other income	0
Total monthly income	1011

Expenses	Amount(£)
Mortgage	0
Secured/HP loan payments	0
Rent	612
Management charge (leasehold property)	0
Council tax	40
Electricity	30
Gas	30
Oil	0
Water Rates	14
Telephone (land line)	0
Mobile phone	45
TV Licence	0
Satellite/Cable TV	10
Internet services	10
Groceries etc.	30
Clothing	0
Petrol/diesel	0
Road tax	0
Car Insurance	0
Car maintenance (including MOT)	0
Car Parking	0
Other travel	0
Childcare/nursery	0
Other child related expenses	0
Medical (prescriptions, dentists, opticians etc.)	0
Pet Insurance/Vet bills	0
Buildings Insurance	0
Contents Insurance	0
Life Assurance	0
Other Insurance	0
Presents (birthday, christmas etc.)	0
Haircuts	0
Entertainment	0
Holiday	0
Emergency Fund	0
Total monthly expenses	821

Secured & HP Debt Description	Debt(£)	Monthly(£)	APR(%)
Mortgage	0	(0)	0
Secured & HP Debt totals	0	-	-

Unsecured Debt Description	Debt(£)	Monthly(£)	APR(%)
Credit Card	760	30	0
Credit Card	3400	100	0
Credit Card	1000	50	0
Motor Loan	10000	210	0
Loan	2000	111	0
Unsecured Debt totals	17160	501	-

Asset Description	Value (£)
Cash	0
House Value (Gross)	0
Shares and bonds	0
Car(s)	0
Other assets (e.g. endowments, jewellery etc)	0
Total Assets	0

[Deleted User]

AlanB1979 said:

I approached a debt advisory service but they were useless, they told me to default on the credit cards instead if trying to get a consolidation loan. 

That's good advice. Consolidation loans just kick the can down the road and people tend to end up in twice as much debt. You won't get further borrowing in your present state in any case.

You're already in arrears on your car, so defaulting on the cards will make little difference to your credit worthiness but will free up money for the essentials. And you don't have enough income to pay everything in any case.

EssexHebridean

Agree with what zx81 says above - stop paying the cards and let them default. Should happen in 3/4 months with any luck. 

Be very careful with your current budgeting - ultimately there is a lot of stuff there that you either ARE, or at least should be paying, that's not included. Does your car deal include everything that it's actually costing you, so all servicing, insurance costs, any any consumables, like tyres, wiper blades etc?  You're paying for a TV package without having a TV license - that can get VERY expensive down the line. It may be that a housemate is paying, but if that is the case make sure it won't be your turn to bear the cost next time it renews! I'd also suggest you check that grocery spend IS accurate - even assuming you eat at work some of the time, you presumably still eat some meals, have tea or coffee etc at home so be cautious that you're including ALL food spends. I'd also suggest that you urgently need to sort out the contents insurance situation - this is not one to be played about with or skimped on, really, I know £10 per month seems a lot right now but if you lose all your belongings it will seem like it would have been a very low cost indeed. Personally I'd cancel the TV package (Assuming it's not shared with other housemates) and pay for the insurance instead - if your TV goes up in flames you won't be able to watch it anyway, and with no insurance you'll not be able to replace it either. Don't assume that there is a blanket contents policy that covers everyone in th eproperty - this isn't usually how it works with house shares. Clothing also needs to be considered - at the very least a "socks & pants" budget. 

Your problem right now is that your income is too low to sustain the level of rent you're paying - and for a house share that also seems pretty high in itself. I'll be honest and say that I think you need to examoine whether your business is viable to continue trying to make a success of - I know that's tough to read, but if you lost the car by the sound of it you'd be forced to that position. Might you be able to reduce the hours you're spending on the business while still letting it tick over, and get additional work elsewhere so you can at least make ends meet?