Is it a good idea to use a loan to partially finally settle a defaulted debt.

RAS

There are two issues, assuming England

Once a debt is defaulted, it falls off your credit record after 6 years, regardless of whether or not you've paid it off.
If you do not pay a debt for 6 years, or acknowledge in it in writing within those 6 years, it becomes state barred. Still exists, but can't be enforced in law.

These are independent factors, so a debt could become statute barred before it disappeared off your credit record, if the creditor took time to issue the default. Or it could fall off your credit record long before it became statute barred if you've made occasional payments. We've even had parents and parters re-setting the statute limit by making a tiny payment under duress.

Nalf03

RAS said:

The debt will disappear from your credit record 6 years after the default. It has defaulted, hasn't it?

Brie said:

there's something about if you acknowledge a debt in writing.  If you haven't done this then the debt will be default from when it shows as a default on your credit history and 6 years later it drops off.  Apparently there's a difference if you say something over the phone or by email but if you use snail mail and say "I owe £XXX" then that's an admission.  But if you have been making payments occasionally that might also be an admission of the debt.  

From what I can find by looking it up, the default will be removed from my credit score 6 years after the date of the default. I think they can mo longer enforce the payment 6 years after you've last acknowledged or made a payment. 

If I'm understanding it correctly. It won't affect my credit score in 4 years time, but the debt can still be enforced for the next 6 years since I recently made a payment. So in theory I could stop making payments, and the debt would be written off in 6 years time, but between now and then they could raise a CCJ and make more trouble for me. So that would mean that paying it off, either fully or partially, would still be the best option?

Nalf03

RAS said:

There are two issues, assuming England

Once a debt is defaulted, it falls off your credit record after 6 years, regardless of whether or not you've paid it off.
If you do not pay a debt for 6 years, or acknowledge in it in writing within those 6 years, it becomes state barred. Still exists, but can't be enforced in law.

These are independent factors, so a debt could become statute barred before it disappeared off your credit record, if the creditor took time to issue the default. Or it could fall off your credit record long before it became statute barred if you've made occasional payments. We've even had parents and parters re-setting the statute limit by making a tiny payment under duress.

Ah, I didn't see this, that's a much better explanation than I found elsewhere. So does that mean I could just stop making payments and it'd all be fine in 6 years? But they could still take me to court before then though? So that's a big risk?

Andyjflet

First things first, you've moved in with parents, how much are you earning and what do you have left over every month? Surely you are now in a position to hit this debt hard and get it gone, talking about taking a 42% loan is completely bonkers, the best way to get straight and recover is to get it paid off, cut back, sell what you have, do you have a car on HP? Sell it.... then use what you have to be debt free. 

Nalf03

Andyjflet said:

First things first, you've moved in with parents, how much are you earning and what do you have left over every month? Surely you are now in a position to hit this debt hard and get it gone, talking about taking a 42% loan is completely bonkers, the best way to get straight and recover is to get it paid off, cut back, sell what you have, do you have a car on HP? Sell it.... then use what you have to be debt free. 

I'm talking about getting a loan to reduce the amount I need to pay back by up to £2000, people keep saying that's bonkers but no-one has really given a reason why yet if its saving money overall (aside from the liklihood of actually getting it). That's also a really harsh tone to take for someone just asking for advice. 

I'm living with my parents on about £30,000 a year. After rent, bills, food and some other emergency payments I didn't really have any left over for the last two years. I am now in a position where I have about £200-£400 that I can pay back in each month, which is why I'm exploring the best options going forward. 

I would absolutely love to sell my car, its one of my biggest expenses between payments, insurance, fuel, etc. I do however need it to get into work each day. Where I live there are no pavements and no nearby public transport. My drive is directly on a narrow, national speed limit country road that is not safe to walk (I've tried). I could get a taxi into work, the shop (can't get deliveries here) abd everything else, but overall that would end up costing more. 

Rob5342

You need to see this through properly and get yourself out of debt with the money you have, taking on more debt to clear exisiting debt means there is a big risk that you end up on the same slipperly slope that got you into debt in the first place.

How much are you repaying towards the debt at the moment. If you maintain that and save the £300 you would be paying towards the loan then it would take you about 9 months to save the settlement amount they are offering. They might act like it's a limited offer but the chances are they'd be open to other offers later. If things don't go to plan you have some spare money instead of an additional debt burden.

Nalf03

Rob5342 said:

You need to see this through properly and get yourself out of debt with the money you have, taking on more debt to clear exisiting debt means there is a big risk that you end up on the same slipperly slope that got you into debt in the first place.

How much are you repaying towards the debt at the moment. If you maintain that and save the £300 you would be paying towards the loan then it would take you about 9 months to save the settlement amount they are offering. They might act like it's a limited offer but the chances are they'd be open to other offers later. If things don't go to plan you have some spare money instead of an additional debt burden.

I hadn't considered just saving up the money and offering the settlement later, that makes a lot of sense and seems obvious in hindsight XD

Rob5342

Nalf03 said:

Andyjflet said:

First things first, you've moved in with parents, how much are you earning and what do you have left over every month? Surely you are now in a position to hit this debt hard and get it gone, talking about taking a 42% loan is completely bonkers, the best way to get straight and recover is to get it paid off, cut back, sell what you have, do you have a car on HP? Sell it.... then use what you have to be debt free. 

I'm talking about getting a loan to reduce the amount I need to pay back by up to £2000, people keep saying that's bonkers but no-one has really given a reason why yet if its saving money overall (aside from the liklihood of actually getting it). That's also a really harsh tone to take for someone just asking for advice.

The reason I'd advise against it is because it ties you into another credit agreement which causes more risk. Say your situation got worse, you lost your job for example. You might not be able to keep up with your repayments, so you might default again, and then end up back where you are now paying a DCA but with a fresh default date and a credit report that's harmed for another 6 years. If you stick with paying the current DCA then you have a fixed date in 4 years time when it will drop off your credit report, if things get worse you can reduce your payments, if they go well you can save for a settlement offer.

Superhoopza

Rob5342 said:

Nalf03 said:

Andyjflet said:

First things first, you've moved in with parents, how much are you earning and what do you have left over every month? Surely you are now in a position to hit this debt hard and get it gone, talking about taking a 42% loan is completely bonkers, the best way to get straight and recover is to get it paid off, cut back, sell what you have, do you have a car on HP? Sell it.... then use what you have to be debt free. 

I'm talking about getting a loan to reduce the amount I need to pay back by up to £2000, people keep saying that's bonkers but no-one has really given a reason why yet if its saving money overall (aside from the liklihood of actually getting it). That's also a really harsh tone to take for someone just asking for advice.

The reason I'd advise against it is because it ties you into another credit agreement which causes more risk. Say your situation got worse, you lost your job for example. You might not be able to keep up with your repayments, so you might default again, and then end up back where you are now paying a DCA but with a fresh default date and a credit report that's harmed for another 6 years. If you stick with paying the current DCA then you have a fixed date in 4 years time when it will drop off your credit report, if things get worse you can reduce your payments, if they go well you can save for a settlement offer.

Sensible and reasoned advice.

Nalf03

Rob5342 said:

Nalf03 said:

Andyjflet said:

First things first, you've moved in with parents, how much are you earning and what do you have left over every month? Surely you are now in a position to hit this debt hard and get it gone, talking about taking a 42% loan is completely bonkers, the best way to get straight and recover is to get it paid off, cut back, sell what you have, do you have a car on HP? Sell it.... then use what you have to be debt free. 

I'm talking about getting a loan to reduce the amount I need to pay back by up to £2000, people keep saying that's bonkers but no-one has really given a reason why yet if its saving money overall (aside from the liklihood of actually getting it). That's also a really harsh tone to take for someone just asking for advice.

The reason I'd advise against it is because it ties you into another credit agreement which causes more risk. Say your situation got worse, you lost your job for example. You might not be able to keep up with your repayments, so you might default again, and then end up back where you are now paying a DCA but with a fresh default date and a credit report that's harmed for another 6 years. If you stick with paying the current DCA then you have a fixed date in 4 years time when it will drop off your credit report, if things get worse you can reduce your payments, if they go well you can save for a settlement offer.

That all makes a lot of sense, thank you