Is a default worse than a bunch of missed payments?

Virtuous93

Essentially i lost my job earlier in the year which made me fall behind in my loan repayments, i now have a default notice advising me to clear the arrears (deadline a few days away) failure to do this would mean i have broken the contract which i assume means they will be put a default on my credit file.

I have the ability to pay but it would put another dent on my cashflow issues since i'm still unemployed, given i've already missed 4 payments for this loan and a couple of other credit lines would it even make a difference if a default was added at this point?

ManyWays

A defaulted debt drops off your credit report after 6 years. A debt with missed payments stays on your credit record for 6 years after the balance is cleared. When your credit record is already patchy with missed payments, stretching to pay to avoid this default is unlikely to be a good idea as you may just get more missed payments elsewhere.

How difficult is it going to be to find a new job? 

kimwp

The experien website says that a late payment will stay on your credit record for six years since registration. A default will stay the same time, but will generally be deemed to be a bit worse because it's persistent non payment.

An arrangement to pay (where you make an agreement to pay less) will stay on your credit record for six years after the debt is paid off.

If you are this close to a default and can't make payments from your income, then it may be better to default and start a dmp (or other solution). Best route is to post your SOA here (link in my signature) - which should be an accurate account of your average income and outgoings and the knowledgeable people of this forum have a look at the best next steps for you.

sourcrates

If you are experiencing financial difficulties, then its not advisable struggling to maintain payments at the expense of affordability, just to maintain a good credit record.

Priority is an affordable budget to live on, credit payments can wait.

Virtuous93

ManyWays said:

A defaulted debt drops off your credit report after 6 years. A debt with missed payments stays on your credit record for 6 years after the balance is cleared. When your credit record is already patchy with missed payments, stretching to pay to avoid this default is unlikely to be a good idea as you may just get more missed payments elsewhere.

How difficult is it going to be to find a new job? 

Next week will be 5 months since i started looking and still no luck so i honestly don't know . I can just about afford to pay the 3 month arrears it will put a whole in my pocket so i'm just curious if i should just accept the default if the damage of 4-5 missed payments has already been done.

enthusiasticsaver

Personally if you have not yet found a job I would not stretch to cover the arrears on a credit card/unsecured loan.  Secured loan is another matter.  You may need that money to cover mortgage/rent/utilities/food which are priorities.  Unsecured debt is not a priority and your credit record will already be affected by missed payments so defaults are nothing too awful.  

sourcrates

Virtuous93 said:

Next week will be 5 months since i started looking and still no luck so i honestly don't know . I can just about afford to pay the 3 month arrears it will put a whole in my pocket so i'm just curious if i should just accept the default if the damage of 4-5 missed payments has already been done.

You will also need to resume contractual monthly repayments every month going forward to stop this account from defaulting in future as well.

Honestly why would you bother throwing away good money, let it default and resume payments when you get another job, by that time it will have been sold to a 3rd party, no sense in struggling when you don`t have to.