CC company offering to help reduce debt - Is there a catch?

exponential

Hi all. 

My wife has had a credit card for a very long time and has only ever made the minimum payment due to low income. She has received a letter from them offering to help to reduce the debt and clear the remaining balance by way of two options:

1: 4-year plan - Keep the card - Reduction of interest rate to 21.66% with an initial payment of £112 per month slowly reducing over the 4-year period to it's lowest payment of £86.99.
Assuming the card is not used during the period, the balance will be paid in full in the 4-year period.

2: 4-year plan - Card is frozen - "paydown agreement" - Reduction of interest rate to 9.9% with fixed monthly payments for the entire duration of £79 per month.
The balance will be cleared in 4 years but you lose the use of the card.

What, if any, will her choice of either of the above options have on her existing credit profile?
During the phone call they had with my wife, they categorically stated that there will be no impact or marker on her credit files.

I can't help but feel that there's a trap we might fall into here that's all.

If it truly is an offer that won't impact her credit profile, we will opt for option 2 as we want to get rid of all credit anyway.

Any help would be greatly appreciated. thank you.

la531983

Its wishful thinking to think they wont mark this as an arrangement to pay, something all future credit checks will throw up (for the next six years).

But you would actually have to ask them the question.

ManyWays

Do these offers come in a letter that says "persistent debt" on it somewhere? Those offers sometimes have no effect on credit records, and it sounds as though they have been quite clear on the phone about this.

can she afford an initial payment of £112 per month? or £79 a month?

exponential

la531983 said:

Its wishful thinking to think they wont mark this as an arrangement to pay, something all future credit checks will throw up (for the next six years).

But you would actually have to ask them the question.

Yeah, I thought as much myself. I've been around the block with creditors a few times so I'm aware of their agenda's.

exponential

ManyWays said:

Do these offers come in a letter that says "persistent debt" on it somewhere? Those offers sometimes have no effect on credit records, and it sounds as though they have been quite clear on the phone about this.

can she afford an initial payment of £112 per month? or £79 a month?

She didn't show me the letter when she got it so I've only just seen it and need to digest what it's saying but it does mention persistent debt near the end of the letter.

I'll post back tomorrow when I've had a chance to absorb what it's saying.  

fatbelly

It's persistent debt

https://nationaldebtline.org/get-information/guides/persistent-debt-ew/

ManyWays

Banks often don't mark these "offers" when there is persistent debt as harming your credit file, so I think you can trust what they said on the phone.

But I like to parrot this back to them in writing, so can you reply saying after the conversation on the phone on xx November, because these offers will not affect my credit score, I would like to accept  the second (or whichever.)

MyRealNameToo

exponential said:

Hi all. 

My wife has had a credit card for a very long time and has only ever made the minimum payment due to low income. She has received a letter from them offering to help to reduce the debt and clear the remaining balance by way of two options:

1: 4-year plan - Keep the card - Reduction of interest rate to 21.66% with an initial payment of £112 per month slowly reducing over the 4-year period to it's lowest payment of £86.99.
Assuming the card is not used during the period, the balance will be paid in full in the 4-year period.

2: 4-year plan - Card is frozen - "paydown agreement" - Reduction of interest rate to 9.9% with fixed monthly payments for the entire duration of £79 per month.
The balance will be cleared in 4 years but you lose the use of the card.

What, if any, will her choice of either of the above options have on her existing credit profile?
During the phone call they had with my wife, they categorically stated that there will be no impact or marker on her credit files.

I can't help but feel that there's a trap we might fall into here that's all.

If it truly is an offer that won't impact her credit profile, we will opt for option 2 as we want to get rid of all credit anyway.

Any help would be greatly appreciated. thank you.

What's her current monthly repayments? 

Most persistent debt arrangements have you pay more than the minimum payment (factoring in the lower interest) and therefore you are within the terms of your contract and it isnt an "arrangement to pay" to be marked on your CRA file.

MEM62

If your wife can only afford the minimum payments then she should not be running up further debt on the card.  That would seem to make option 2 the prudent choice.  Any negative impact on her credit standing is moot as it sounds as if she should not be getting further into debt anyway.