Advice for freezing interest.

Bennyblanco187

Dear Forum,

I have debts on my credit cards, for example I have an account with Aqua that is about 4.5 years old. It is a very high interest rate card. It started at 60%, then it went down to 55%, and then it was going to go down again but as I have a severe disability (Uni Cred/PIP) I forgot to make the payment on time and paid it a day late. Due to this they declined to lower my interest rate. I called them and they weren't interested just said no. The card has a £3,000 debt on it and more then £130 interest a month. I didn't realize or understand how interest works, I didn't realize the true cost that I realize now the interest is so much per month there is no real expectation of paying this off this way. Aqua kept offering me higher credit limits and I accepted them. I feel  like I have responsibility, but also was told by someone this might be unfair lending as them knowing I am on benefits that I couldn't afford such a credit limit.

 The last 2 months I have been trying to make bigger payments. I had been paying £200 a month but it was barely taking any debt off about £70 a month with £130 interest. Nov I paid £300 and Dec I have paid £250 but again realize that this isn't possible on my budget and have left myself without enough money. I also have another card with Newday which I owe 1,300 on a 1,500 card so I thought they knew my situation. My original plan was to ask for a freeze in interest for a period of 6 months to 1 year on just the AQUA card for me to try and get it paid off and not put any purchases on the card in the meantime. I haven't used it for about 2 months. Is it likely going to be a fight to ask them to freeze interest? I had someone tell  me the other day that it was likely irresponsible lending as I have a severe disability and with Newday knowing my benefits that I couldn't afford all this credit limit and interest.

I don't want to phone them as  they were not interested last time I called so think a letter would be better, especially as I cant think and talk properly on the phone or understand what they are saying and I get confused and forget what they have said shortly after they have said it. 

Any advice would be greatly appreciated, my main goal is to at least get interest froze on the worst card so I can at least get it paid off over time. If I could reasonably hope for a more manageable resolution that would make my life easier. I think in just the last year I must of paid approximately £1,500 in interest. It took me a long time to write this as its very difficult explaining things, I really did my best and hope it is easy to understand and really appreciate any advice.

Ben

EDIT They didn't know about my disability as I was working when I got the card before my health got worse, however I asked them to put a note on the system when I call to please have patience with me as mental disability and Epilepsy etc. Does this count about them knowing about my disability? I don't think they would of realized that I was on benefits now because of it, that may be something they didn't know about.

EssexHebridean

One of the best ways of getting interest frozen is to stop making payments - it might take a few months, but they will hopefully then default you and eventually the debt will be passed to a debt collection agency, most likely. 

Are are you managing to stick to a monthly budget without using credit? I ask because obviously if you are going to stop making payments to the card you can't still be using it! I note you've said you've not used the aqua card for a couple of months but that doesn't quite sound like a full step away from using credit, unfortunately! 

It might be helpful to take some time to complete a Statement of Affairs (SOA) and post that in here - there is a link to a calculator for this in my signature below. That might help us to establish whether if the debt was defaulted so interest stopped building, there is a realistic prospect of you being able to simply chip away and pay it off by means of a DMP (Debt Management Plan).

Bennyblanco187

Thank you for your reply.

I really dont want at this point to default and have the stress of debt collectors and ruining my credit score.

I am able to live without credit card, and wont he using the Aqua card anymore.

I am considering to just start sending letters but my thinking is fragmented and am trying to find out what the nest approach would be with most chance of success.

Should I start with a phone call?

[Deleted User]

Your credit files will be impacted by any temporary freezing of interest, so you may as well default and benefit from having the interest permanently stopped. 

The only benefit of continuing to pay is to not receive letters asking you to pay.

Brie

To be blunt about it I wouldn't be overly concerned about your credit score.  The cards you have are not mainstream and would mark you to any big bank/card provider as not being a good risk.  Plus the fact that you are now on benefits and therefore a limited income means very few would be interested in offering you anything for a couple of years at a very minimum, possibly longer.

I do agree that to post a SOA is a great way to get good advice.  It also would help you focus on what issues you may have with your household budget.  At a minimum would you be able to post an accurate picture of how much on both cards, interest rate, minimum payment?  

And I do agree that writing to them is a good way to get your thoughts down coherently and be able to get a written reply so you can think out your next steps.  I hate ringing card companies as if I get someone who is not great at their job or customer service it makes me cranky which does not help.  It also means that if they make an error in what they have said I have no comeback.

BTW well done for confronting the problem.  That's always the most difficult bit.

Bennyblanco187

Thatnk you everyone for the advice and support. I gained the courage to call them today. They said if I fill out a form for my finances they can freeze interest and put me on a cheap payment plan.

I appreciate your advice about considering defaulting, this is something I now need to consider. If I default can debt collectors start showing up? Can they force me to court to pay the balance? This really scares me and I feel I need to find put more information about it so I understand what is happening.

For now I will consider the interest freeze, but find out more about exactly what will happen if I default so I am prepared.

Thank you for help and advice.

Brie

No they won't force you to court.  They will try to agree a payment plan in the first instance.  Going to court costs them money and that is something that they don't want to do.

I suspect the finances info they are requesting will be similar to a SOA so that will be a good job for you to do.

Well done on making the call.

Dottydoolay

Hiya, 
A few years ago(way before pandemic)  I was in a similar situation with Barclaycard after losing work. I rang them and did an expenses thing with them and we agreed a monthly payment that was far more affordable and actually perfectly fine. They froze the interest altogether and I just paid it all off month by month and cleared it. 

I would see what the company have to say before considering default as you may well be able to sort things directly with them with no hassle at all.

Dont you be worrying about court or debt collectors or anything like that at this stage likelihood is it won’t happen or come to that. 

There really are lots of options open to you at the moment and I don’t want you getting worried and stressed about this, life’s tough enough.

Suseka97

It sounds like you have a plan going forward and its good to hear that Aqua seem to be trying to help.  

Have they indicated how long they intend to freeze interest?  By 'cheap payment plan' they are effectively putting you on their own form of a debt management plan and what will happen to your credit file is that they will place AP or AR markers on it each month you remain on this 'plan' and assuming it will run for some years to come - these markers could have more of a negative impact than a default.

To clarify - AP/AR markers stay on file for 6 years from the date the debt is settled (paid in full) whereas a default marker will stay on your file from 6 years from the date it was applied regardless of whether the account has been paid in full or not.  So this is why you are being advised to stop making payments and get the account/s defaulted.

I'm not saying which, for you, is the better option - just pointing out the difference between 'arrangements to pay' and 'defaults' when it comes to your credit files.  

Have you considered speaking with one of the free debt charities - such as StepChange?  They can help you with your income and expenditure statement and will suggest options based on your personal circumstances.

Above all, please do not let this stress you out - its just a case of taking a step back and thinking clearly about your options.  If you were to stop making payment to the Aqua account, you won't suddenly have debt collectors at your door and nor would you find yourself in court as the next step.  Debt collection is a lengthy and drawn out process and speaking with a debt adviser will put your mind at ease.

sourcrates

Aqua will only allow this as a short term plan, maybe for up to 6 months, its usually less than this, after that, if your still unable to make normal repayments, they will just refer you to one of the debt advice charities, normally stepchange, to get advice on your next steps.

There is a scheme called breathing space, which allows approx. 60 days without creditor contact, it all helps, but again, is only a temporary solution, and is only available through a recognised debt charity whilst debt advise is given.

In your situation, I`d look to be defaulting on these debts, they are all non priority, and as the interest is crippling you, it makes no sense whatsoever to carry on paying what is clearly unaffordable to you, even the arrangement they offer you may not be a figure you are comfortable with, people tend to vastly underestimate what they need to live on, so don`t be quick filling in any of there forms.

What you have to understand is debt collection is a process, not just random demands for payment, it has a structure, and is always done as cheaply as possible, debt collectors are just normal folk, who work in a call centre, they use the phone a lot, as its quick and easy, they don`t knock on doors, ever.

Certain debt collection companies still employ collectors to work for them (just self employed people who have no power to do anything) if someone ignores all contact for a number of months/years, then one of these collectors may be assigned to come knock on your door, this is very rare these days, and they can be ignored, the only large company I know still doing this is Resolve call, there may be other smaller outfits I'm unaware of, but mostly this will never be an issue for you.

So you can quite easily and safely, stop paying your cards, allow them to default, which may take a while, then set up a payment plan that is affordable to you, with whoever owns the debts at that stage.

You agree a payment that allows you to also save a similar amount each month, so that at some point further down the line, you would be able to offer full and final settlements on these debts, at a good discount, thus offsetting any interest added between you originally stopping payments, and the date they defaulted.

As said previously, there is structure and order to these things, you just have to know how to use the system to your advantage, to obtain the results you want, you call the shots, not them.

Good luck whatever you decide on.

TripleH

Bennyblanco187 if you cut up the credit cards you have, are you able to survive / get by on a day to day basis?

It's silly taking these steps (responsible as they are) to pay off the debt if in 24 months time, you're back to this position again.

Looking at the long term, is a fresh start a better option? Yes your credit file will be trashed but that's only temporary. If your disability is unlikely to mean you can work in the medium to long term, maybe making a fresh start is the answer?