Asking credit cards to freeze or reduce interest

midlands13790

Good afternoon all, its my first post on here and I know I am in a bad situation please be kind.

I owe around 30k spread across 6 credit cards, I also owe around 12k on loans which are due to be paid next year one Jan/Feb and one 6 months later. Aswell as these loans ending my partner will see a child maintenance agreement end next year altogether this will save us around £639. I am making payments to my credit cards of at least the minimum payment and 5 of the 6 are paying a little extra on top. We have sat down and can see where we have gone wrong in the past by borrowing to try and clear debt and can now see that this method doesn't work. During the pandemic we have relied on the cards more than we should have or would have liked to. 

Our wages do cover the outgoings but things are getting a bit tighter, rent has recently been increased and we all know about the predicted cost of living increases still to come. I want to try and address this issue now before things get even worse. My partner is in a DMP and ideally it is something I would like to avoid. As said I have been able to make payments to all my commitments however all the cards have now had any promo rate end and I can't get accepted for any others (not even the likes of Aqua 0% currently) despite all this my score is still fair to good even though I know this is relatively pointless. I have been reading some articles on here relating to persistant debt, a couple of lenders have sent letters relating to this in the past. With the extra money we would have next year I really would like to try and "limp through" until then and have thought about writing to all the card providers asking them to look at lowering or freezing interest, without this I would probably end up on a DMP and going off my partners experience interest would then be frozen anyway and it would probably take them longer to get the money back. If they agreed to the freeze I am confident I could "avalanche" the debts quicker than a DMP will repay. My understanding is that this also wouldn't affect my credit rating/history according to an article on "nerd wallet" sorry unable to post link as a new member

So my main questions are: Has anyone had any success asking providers to adjust the interest being paid? Is there a template of a letter I can send as I want to make sure any correspondence I send covers all bases and sounds correct.

Thanks in advance

EssexHebridean

You certainly have the correct idea that you cannot "borrow your way out of debt" - although it sounds as though you may have learned this the hard way, at least now it is a lesson learned. 

I'd suggest that your first step here is to put together your Statement of Affairs (SOA) - you can find a link to a calculator for this in my signature. Fill it out honestly and accurately - you will likely find that getting together a years worth of bank and card statements will be a help to make sure you don't miss anything. Be sure to remember any "one off" annual costs as well as the monthly and quarterly payments. It also needs to reflect the situation as it is right now - not what you think you should be doing financially, or what you imagine we expect to see. Use the "Format for MSE" option and copy/paste it into here and we can have a loo and see if there are any savings that we can identify in your budget that might free up that little bit extra for debt-busting until the anticipated savings kick in. 

I'm guessing you'd be unlikely to be accepted but have you looked at an eligibility calculator to see if you might be able to get any of the card debts onto 0% balance transfer cards? It's worth a look - the MSE Credit Club might be helpful here - it's a free service and will let you see one of your credit reports in full at no cost, too. 

midlands13790

Thanks a budget does need to be done expecting it to be painful though!! Me and mr need a sit down once the little one is in bed and to get it done. I have done the eligibility calculators on here and all results are 0 I think because my balances are high and payments only slightly above the minimum. Do you mind if I ask do you have any experience with the freezing of interest etc?

sourcrates

The "nerd wallet" article was a tad incorrect unfortunately.

Credit card companies will do short term arrangements with you, that might include stopping or reducing interest, or lowering repayments, but they will only do so for around 6 months, any longer than that, and they will assume you are in financial difficulties, and will refer you to one of the free debt charities.

And even though the call handler may say it won`t effect your credit file, they still tend to mark your file as an "arrangement to pay" (AP) markers, these can stay on your file until the debt is repaid in full, and can be worse than a default in some cases.

So if the debt is becoming unaffordable, you might as well go the whole hog and enter debt management, these type of arrangements are longer term.

midlands13790

Thanks for your comments I will definitely take them on board

EssexHebridean

I don't - but Sourcrates above is a good source of advice on this sort of thing. 

Something to be aware of at this stage is that pretty much whichever route you take will leave an footprint on your credit file unfortunately - unless you can free up enough money via savings in your expenditure that you can keep on ticking over with the payments until your credit history begins to improve and you can start to make some decent impact on the balances. 

Karonher

Just on a slightly different matter and obviously no need to comment, but will the full figure be saved when the maintenance agreement ends? It may not be a legal requirement but there may still be some money spent on your partner's child/children.

midlands13790

Yea the full figure would be saved as that 130 is purely to the Mum anything else spent is out of “our” money. There is also an expectation that he would be working and supporting himself not relying on my partner 

midlands13790

Hi back again with a bit of an update and after some more advice.

I have spoke to a couple of my creditors, Halifax said they would put me onto a "proving period" where I pay £85 (a reduced amount compared to minimum CC payment) for 6 months and then they may offer me a consolidation loan. Barclaycard told me I can pay a reduced amount but will show as a late payment? instead of any kind of agreement. Does the Halifax option sound feasible or has anyone experienced similar?

I am coming round to accepting I need a DMP more. Stepchange think I could clear my debts in just under 3 years although likelyhood would be a bit longer. We were expecting to be in a position to buy a house in 3/4 years would this still be possible, I accept we would likely be with a sub-prime lender eg going through simplyadverse if they are still around then.

Finally after doing some more reading it seems I should just stop paying my debts now and wait for them to default before going onto a DMP is that correct? My partner was never advised of this when setting his up with payplan. If this is best cause of action do I just stop paying or should I send any letters? The thought of constant phonecalls and letters is daunting to me.

Thanks in advance

EssexHebridean

Halifax are delighted to offer you a consolidation loan because they are fully aware that the vast majority of people who consolidate end up in more debt. For avoidance of doubt, I refer you back to the second paragraph in your first post in the thread...the one where you acknowledged that you'd gone wrong in the past by trying to borrow your way out of debt. 

I beggars belief that lenders are STILL peddling consolidation - and even more so to someone who has told them they are already struggling now, and at a time when household bills are sky rocketing. Halifax should be ashamed of themselves. 

And yes - ideally you let debts default before entering into a DMP. Two reasons - first that this means the interest will stop accruing, but also that it gives you some time to use what you would have been paying to debt to create an emergency fund. 

Thrugelmir

EssexHebridean said:

Halifax are delighted to offer you a consolidation loan because they are fully aware that the vast majority of people who consolidate end up in more debt. 

Front line staff are not trained debt advisors nor is Halifax in the business of giving tailored advice. They are merely providing an option, not the solution. That can only come from the person themselves.