Defaults have begun: self-managed DMP

Beardy123

Hi everyone,

This is my first post, so apologies in advance for any newbie mistakes.

I’ve been following this thread for a while now and have been taking on board the advice shared here. Like many others, I found myself stuck in a cycle of growing debt, with interest payments becoming unmanageable; all stems from a combination of moving house during covid/ mortgage interest rate increases/ cost-of-living increases/ relationship break-up.

For the sake of both my mental health and long-term financial stability, I decided to stop the cycle. I went no contact and stopped payments on a few credit cards and a loan account. I've been waiting 3 or 4 months to get the default notices on these accounts. My plan is to self-manage a DMP once that becomes an option.

A couple of weeks ago, my Zopa loan was finally marked as “defaulted.” I’ve now received a message from Zopa saying:

"As your loan has been defaulted, you now need to pay off your outstanding balance. Please contact us urgently so we can talk about setting up a manageable repayment plan. If you are able to raise some funds, we may be able to offer you a discount to settle your outstanding balance at a reduced rate."

My question is: is this the point where I make contact and arrange a low monthly repayment (e.g. £20/month)? Or should I wait longer and see if the debt is sold on?

After all, £20/month to Zopa is the same as £20/month to a debt purchaser… right?

ManyWays

That is interestingly soon for Zopa to consider a discount to settle, I wonder if they are worried about an affordability complaints, one person here has had a big refund from them (see https://forums.moneysavingexpert.com/discussion/6607200/zopa-affordability-complaint-nearly-there#latest)

tigergambit

Hi Beardy,

Yes, you can now contact them to set up a plan but
- Check that it shows as a default on your credit report first
- Consider an affordability complaint as above
- Prepare a SOA demonstrating minimal surplus in case you need one
- Tell them how much you will be paying (based on that surplus calculation, pro rata with other creditors)

I haven't had debt with Zopa but it looks like they manage these in house - if they don't like how much you are paying they will probably sell on at a later stage. 

Beardy123

The loan is showing as defaulted on Experian, so the default is already registered.

I called Zopa to discuss it. They said the outstanding balance is frozen (no more interest), and suggested setting up a repayment plan through PayPlan. I explained I didn’t want to go through PayPlan and would prefer to manage repayments myself.

They offered to set up a direct repayment plan with me, based on my suggestion of £10 per month. However, because I’m not willing to share income and expenditure details, they said the plan would need to be reviewed every 6 months.

More worryingly, they said that any repayment plan would stay on my credit report until the debt is fully repaid; this is not what I want.

I absolutely want to repay what I owe. But realistically, it will take longer than 6 years at £10 a month, and I’m OK with that. I can’t afford a full-and-final settlement right now- even if it was 30% to 50% of the balance.

My priority is to make affordable repayments, until I can afford to clear it or settle, but for my credit file to be clear 6 years after the default date, even if the debt isn’t fully repaid by then.

I ended the call without agreeing to anything.

It’s an unsecured loan, but it still feels scary. I don’t want to end up in court.

Am I right in thinking the defaulted account will disappear after 6 years regardless of the repayment status?

ManyWays

More worryingly, they said that any repayment plan would stay on my credit report until the debt is fully repaid
what is worrying is that lenders don't seem to understand how credit scoring works. If there is a default on your credit record, then it will drop off your record 6 years after the default date. You have seen the default on Experian, you can check Equifax and TransUnion if you are nervous, but they should be the same. 

Rob5342

If it has defaulted then you have a fixed date when it will drop off your report, it will drop off regardless of what you do or dont pay and the only way it your credit report could be affected for longer is if they get a ccj against you. The only reason not to start paying now is if you wanted to save up a bit more first. If it hadn't defaulted then a payment arrangement would stay on for 6 years after the debt was fully repaid.

After all, £20/month to Zopa is the same as £20/month to a debt purchaser… right?

From your point of view yes, just pay what you can afford and get an affordability complaint in. A debt purchaser would have paid about 10% for the debt, so from their point of view £20 to a debt purchaser is like £200 to Zopa. That's something to bear in mind further down the line if you are in a position to make a settlement offer and the debt has been sold on. 

Rob5342

Beardy123 said:

It’s an unsecured loan, but it still feels scary. I don’t want to end up in court.

There's no need to be concerned about CCJs. They are done by post or online and are just an order to pay what you can afford. If you are already paying what you can afford then other than being reported on your credit report having one makes little practical difference. Also original creditors normally just sell debts on to debt purchasers if they aren't happy. They are sold for around 10% of their value so they can make a nice little profit just by accepting your payments and have little incentive to try and get a CCJ that would only result in them getting the same amount.

You can never completely rule out a CCJ but if if you enage with the creditor it's unlikely you'll get one and isn't much of a problem even if you do.

fatbelly

Most debts, maybe 90%, never see court action.

If you are paying what you can afford and it clears the debt in 5-7 years, there is no point in them throwing further money at it. For lenders it is a commercial decision, for individuals and small local firms it could be different.

If you are not paying what you can afford, they have 6 years to make a decision