Is defauting on loans the way to go?

enthusiasticsaver

I would default on them all  then sort out a DMP.  You can either include the overdraft in a DMP but you  will need a new clean bank account and you will need to save for emergencies.  Don't make any payments in the meantime.  Your credit record will already be shot.  You can renew your mortgage deal with your current provider when it expires. 

CXG1979

OK Guys, so from what I see if I understand what you're trying to tell me; credit files do NOT pay mind to the volume of defaulted accounts - it is either you have or you havent.  Assuming Zopa do not look at me paying off the others normally, would I not try and salvage these rather than default them as well, for as the default ages over time, and the rest are up to date and not defaulted, surely that works in my favour? Just a question based on what you guys are telling me so far - thank you all.

CXG1979

From Google: 

Yes, defaults on your credit file do become less of an issue as they age, and their impact on your credit score lessens over time. While a default remains on your credit file for six years from the date it's recorded, its negative impact on your ability to obtain credit tends to decrease as it gets older

CXG1979

And this:

Building Positive History:

Even with a default on your file, you can still improve your credit score by consistently making on-time payments on your other debts

MattMattMattUK

CXG1979 said:

And this:

Building Positive History:

Even with a default on your file, you can still improve your credit score by consistently making on-time payments on your other debts

Your credit score is a pointless and meaningless number, ignore it, as well as anything that recommends you improve your credit score. 

CXG1979 said:

From Google: 

Yes, defaults on your credit file do become less of an issue as they age, and their impact on your credit score lessens over time. While a default remains on your credit file for six years from the date it's recorded, its negative impact on your ability to obtain credit tends to decrease as it gets older

Ignore the Google AI answer, it will be drawing in information from the American system where credit scores are real.

CXG1979 said:

OK Guys, so from what I see if I understand what you're trying to tell me; credit files do NOT pay mind to the volume of defaulted accounts - it is either you have or you havent.  Assuming Zopa do not look at me paying off the others normally

If you default on them all then you stop paying interest on them all, meaning that they are cheaper and you can clear them quicker. If you are are going to default on one then it makes sense to default on all, there is nothing to be gained by only defaulting some of your debts but not others.

CXG1979 said:

would I not try and salvage these rather than default them as well

What do you mean by salvage? They are of no real use, you are in debt, getting in to debt again is not going to "salvage" anything.

CXG1979 said:

for as the default ages over time, and the rest are up to date and not defaulted, surely that works in my favour? 

Not really. Future lenders will base their opinion on the fact that you defaulted on the loans is going to be the biggest factor.

CXG1979 said:

Just a question based on what you guys are telling me so far - thank you all.

You got yourself into this situation by borrowing more than you could afford to repay, I really implore you to take this time to reconsider your relationship with money. You already seem to be trying to work out how quickly you will be able to start borrowing again, worried about not being able to obtain more credit in the future etc. Your main aim should be to clear these debts in the quickest and most effective way whilst not impacting your mortgage, that means defaulting all your unsecured debts and then a DMP (either through a non-fee charging charity or self-managed), followed by careful financial management after, making sure everything is paid on time, not carrying debt going forward and avoiding unnecessary borrowing. 

ManyWays

CXG1979 said:

...Assuming Zopa do not look at me paying off the others normally...

If Zopa don't, the debt collector they are sold to will look at that. Creditors are often a lot less trouble than people expect when you cant afford to pay them anything or you treat them all equally. But when you have 2 large debts that you are choosing not to pay, and you are paying all the others normally, not even reduced amounts, and you have a house with equity, it is likely you may end up with a CCJ which would be a disaster for your credit score. What you are proposing may sound like a clever trick, but it may backfire on you.

Will it backfire? I dont know and very few people have tried this approach because it doesnt make sense.

Even if you dont end up with a CCJ, you will still have paid a LOT more interest on the other debts. Instead of a bad credit rating, you are hoping to get away with a poor credit rating through paying a lot of interest you dont have to. That is not a good idea. 

tigergambit

CXG1979 said:

OK Guys, so from what I see if I understand what you're trying to tell me; credit files do NOT pay mind to the volume of defaulted accounts - it is either you have or you havent.  Assuming Zopa do not look at me paying off the others normally, would I not try and salvage these rather than default them as well, for as the default ages over time, and the rest are up to date and not defaulted, surely that works in my favour? Just a question based on what you guys are telling me so far - thank you all.

Why would you assume that Zola would ignore you treating other creditors preferentially? 

That's a very high risk assumption to make and could easily end in tears. Default everything and pay creditors a proportion of your payment according to your debt with each. Much cheaper that way, easier to keep on top of and much less chance of something nasty happening.