Just Default? Should this be advised more mainstream for unsecured debt?

luvmse

Please do not default on your UNSECURED debts, without considering and understanding the consequences.

Just looking to start a discussion on why debt charities, advisors, MSE, even Martin himself never promote defaulting on unsecured debts as a legitimate way of getting debt/stress free quicker (freezing interest and charges can be a huge step forward to being debt free). Obviously the negatives would need to be highlighted, wrecked credit for 6 years etc.

I helped my dad a few years ago to deal with his long term debts, by extending him the use of my interest free balance transfer options. He was debt free within 4 years.

Prior to this he had been paying £300 a month on his credit card debt for years, incurring approx £220 interest monthly, looking at a 28 year timescale to clear the debt. All he really needed to do was default, get the interest frozen and pay back whatever he could afford. Saving himself thousands.

I recently got out of my depth with my own unsecured debt and decided the best plan was to default on all my credit cards, to get the interest and charges stopped. Unsecured debt does not bother me, I lose no sleep over it. Is this a case of knowledge is power? Why are we (as a society) not sharing this knowledge openly to all those who feel there is no light at the end of the tunnel?

Morals aside, this is surely the best way forward for many individuals who do not know how to navigate the financial systems? especially in the nation's current financial climate?

Rob5342

People like Stepchange are funded by the lenders, so they will have a mutual interest in getting people to repay debts instead of defaulting them.

sourcrates

A classic example of why it`s sometimes better to default than agree an arrangement, is when a debtors income is assessed at a level where the minimum payment is equal too, or more than the contractual payment would have been.

Under those circumstances creditors will not stop charging interest, so you can find yourself in a position even worse than it was before.

Plus you suffer for longer credit file wise, instead of 6 years, your file may be affected for twice as long, or more under an arrangement to pay.

A good debt advisor will explain all the options to you, and allow you to make an informed choice, that is why forums such as this exist, a debt charity will always steer you according to there own guidelines, a compromise if you like, those who charge for advise have only one interest at heart, and that`s separating you from what's left of your hard earned money, you should avoid the latter.

Rob5342

I wish I known about defaulting earlier. I started a dmp in June 2021 and some debts are only defaulting now after I stopped paying them. If I'd stopped paying at the beginning then the date I have a clean credit record could have been at least a year earlier.

I followed Stepchange's advice and trusted what they said, it never occurred to me that they might have been recommending a bad option

sparks_2023

I was always under the impression that a default on the credit file was terrible. An absolute disaster.

But after just getting 2 of them I actually realise it is liberating. I can take my time to pay them ( until a CCJ looms ) and the stress is all gone. And once I had 1 default it hardly matters if I get any more.

Sure, no credit for 6 years, but maybe that is exactly what I need ?

EssexHebridean

sparks_2023 said:

I was always under the impression that a default on the credit file was terrible. An absolute disaster.

But after just getting 2 of them I actually realise it is liberating. I can take my time to pay them ( until a CCJ looms ) and the stress is all gone. And once I had 1 default it hardly matters if I get any more.

Sure, no credit for 6 years, but maybe that is exactly what I need ?

In many cases, that final sentence nails it. 

Rob5342

EssexHebridean said:

sparks_2023 said:

I was always under the impression that a default on the credit file was terrible. An absolute disaster.

But after just getting 2 of them I actually realise it is liberating. I can take my time to pay them ( until a CCJ looms ) and the stress is all gone. And once I had 1 default it hardly matters if I get any more.

Sure, no credit for 6 years, but maybe that is exactly what I need ?

In many cases, that final sentence nails it. 

I got too used to having credit and the thought of not having it made me feel very uneasy. I'm on a DMP now with numerous defaults and not having credit has done me the world of good. I now budget properly looking months in advance for upcoming payments. I can have a treat occasionally knowing I can actually afford it instead of using credit and convincing myself it will be a one off (which it never was)

DjangoUnchained

i found that when i defaulted on three credit cards only one actually showed on my credit file and that came off after 2 years even though i never paid any of it, i know scores dont mean much but it had minimum effect anyway. if id of known i would have defaulted much earlier.

fatbelly

luvmse said:

Just looking to start a discussion on why debt charities, advisors, MSE, even Martin himself never promote defaulting on unsecured debts as a legitimate way of getting debt/stress free quicker (freezing interest and charges can be a huge step forward to being debt free). Obviously the negatives would need to be highlighted, wrecked credit for 6 years etc.

I'm an adviser with Citizens Advice and I do discuss exactly that. But the advice process is to discuss options and consequences, not to promote one option.

At the end of the day it's the client's informed choice

luvmse

fatbelly said:

luvmse said:

Just looking to start a discussion on why debt charities, advisors, MSE, even Martin himself never promote defaulting on unsecured debts as a legitimate way of getting debt/stress free quicker (freezing interest and charges can be a huge step forward to being debt free). Obviously the negatives would need to be highlighted, wrecked credit for 6 years etc.

I'm an adviser with Citizens Advice and I do discuss exactly that. But the advice process is to discuss options and consequences, not to promote one option.

At the end of the day it's the client's informed choice

That's refreshing to hear. May I ask if that is your own decision or CAB policy nationwide? to explain how defaulting will instantly freeze all interest etc.

luvmse

sourcrates said:

A classic example of why it`s sometimes better to default than agree an arrangement, is when a debtors income is assessed at a level where the minimum payment is equal too, or more than the contractual payment would have been.

Under those circumstances creditors will not stop charging interest, so you can find yourself in a position even worse than it was before.

Plus you suffer for longer credit file wise, instead of 6 years, your file may be affected for twice as long, or more under an arrangement to pay.

A good debt advisor will explain all the options to you, and allow you to make an informed choice, that is why forums such as this exist, a debt charity will always steer you according to there own guidelines, a compromise if you like, those who charge for advise have only one interest at heart, and that`s separating you from what's left of your hard earned money, you should avoid the latter.

It's a shame that arrangement to pay, or DMP etc are not on the same journey as a default. If all these options would expire after 6 years from the date they are actioned in the first instance it would make more sense.