As a debtor, am I in a better position now the credit crunch is here?

payingfornowt

WITHOUT JUDGEMENT

Does anybody here feel like they are missing a trick?

I am fortunate in that I have been dumb enough to rack up 13k of debt but also earn good enough money to pay it off.

But I think the high street banks are short of cash right now due to people defaulting on mortgages, loans and credit cards. NR Should have gone under, B&B Will probably come close and I reckon HBOS is going down to Chinatown. Hence the strict criteria on borrowing these days.

I am thinking of defaulting purposefully in an effort to reduce my payments once accounts are passed to DCA’s instead of busting my b**s paying the full whack each month with interest.

These banks are going to want to get in money as fast as they can and the competetion between peoples creditors should give the consumer a bit more of a powerful negotiating position..... or not!

As I say I do not want to cause any offence to anybody whatever situation you are in I wish you luck. Just would be interested to hear everybodies views.

immoral_angeluk

The credit crunch if anything is going to make it harder for those who ARE struggling to repay their debt. The banks are having to get the money back somehow and if they're cutting back giving out more credit they're going to be working 10x harder to get the money they are already owed back.

Treadmill

Say cheerio to your credit rating.

payingfornowt

immoral_angeluk wrote: »

The credit crunch if anything is going to make it harder for those who ARE struggling to repay their debt. The banks are having to get the money back somehow and if they're cutting back giving out more credit they're going to be working 10x harder to get the money they are already owed back.

Thanks IA

Yeah thats kind of where I am coming from.... kind of like reverse supply and demand, there will be more demand from the banks for their monthly payments but still the same supply from us debtors so if it wasnt contracted or already spent the price would fall......

Or am I overthinking this!!??

pania

hmmmm. have to say i think you'd be crackers to do so. an awful lot of the credit issues currently in the industry are as a result of media hype and lowered perceived user value. There is absolutely no suggestion at this time that any of the banks are going to disappear from view. headlines like "HOUSE PRICES TO CRASH!!!!" turn over to page 4 where the article is continued and in the 8th paragraph down the line "there is no suggestion that house prices are going to crash..." EH?!?!?!
and "Halifax offer preferential deals to wealthy customers!!!!" if you have a 25% deposit, halifax will offer you a much lower interest rate!" erm, yeah, they always have.....it's to do with risk. both of these headlines in papers in may and june.
We had a client pull out of a house purchase the other week "due to the credit crunch" when asked exactly what he was concerned about he answered, "I don't know i just read about it in the papers."

You would be in a strong negotiating position with regards to your ability to repay the debt in a lump sum without purposefully defaulting. Call them and say that you have xxx amount now do they want it in full and final or do they not, simple as.

If you DO default you are the only one that will come off worst.
you will experience....
loss of ability to obtain credit for the next 6 years, even an emergency credit card wouldn't be possible
loss of ability to re-mortgage/obtain a new mortgage at a decent interest rate for the same length of time
even some jobs now insist on credit scoring.

all of this to possibly save a couple of pounds on paying off the debt?

you will be putting yourself at the mercy of a situation that in all honesty not one person knows just how bad or otherwise it is, even the likes of myself working in the financial arena do not have a feel on the real situation.
Northern rock are dispersing their mortgage book rapidly, HBOS is in a very strong position right now and managing fine, and even if they do go down, you will still have to pay the debt back, default or no.

I am in 24k of debt and would love to throw myself at the mercy of this situation but the fact is, as always happens in the great UK, the consumer will not come off any better out of it in anyway shape or form or gain from it in any way.

How about maybe shuffling your debt to get rid of some of it? or looking at alternative options than wrecking your credit rating. their are loads of suggestions to be had around here, give us a try.

payingfornowt

pania wrote: »

hmmmm. have to say i think you'd be crackers to do so. an awful lot of the credit issues currently in the industry are as a result of media hype and lowered perceived user value. There is absolutely no suggestion at this time that any of the banks are going to disappear from view. headlines like "HOUSE PRICES TO CRASH!!!!" turn over to page 4 where the article is continued and in the 8th paragraph down the line "there is no suggestion that house prices are going to crash..." EH?!?!?!
and "Halifax offer preferential deals to wealthy customers!!!!" if you have a 25% deposit, halifax will offer you a much lower interest rate!" erm, yeah, they always have.....it's to do with risk. both of these headlines in papers in may and june.
We had a client pull out of a house purchase the other week "due to the credit crunch" when asked exactly what he was concerned about he answered, "I don't know i just read about it in the papers."

You would be in a strong negotiating position with regards to your ability to repay the debt in a lump sum without purposefully defaulting. Call them and say that you have xxx amount now do they want it in full and final or do they not, simple as.

If you DO default you are the only one that will come off worst.
you will experience....
loss of ability to obtain credit for the next 6 years, even an emergency credit card wouldn't be possible
loss of ability to re-mortgage/obtain a new mortgage at a decent interest rate for the same length of time
even some jobs now insist on credit scoring.

all of this to possibly save a couple of pounds on paying off the debt?

you will be putting yourself at the mercy of a situation that in all honesty not one person knows just how bad or otherwise it is, even the likes of myself working in the financial arena do not have a feel on the real situation.
Northern rock are dispersing their mortgage book rapidly, HBOS is in a very strong position right now and managing fine, and even if they do go down, you will still have to pay the debt back, default or no.

I am in 24k of debt and would love to throw myself at the mercy of this situation but the fact is, as always happens in the great UK, the consumer will not come off any better out of it in anyway shape or form or gain from it in any way.

How about maybe shuffling your debt to get rid of some of it? or looking at alternative options than wrecking your credit rating. their are loads of suggestions to be had around here, give us a try.

Thanks Pania! I think youre right, if a lump sum were available for early settlements then my theory would stack up... theoretically but from what I can see the debt would probably have to be with a DCA to negotiate any kind of real discount.... the collateral would be my credit score and the hassle.

pania

Payingfornowt...from someone who is where you're credit rating will end up, the small amount that you MAY gain in return for being able to pay lump sums is not worth it at all.
Even if you do negotiate a settlement, your creditors will mark it as a partial settlement and not fully satisfied. you will need to wait atleast 6 months before the majority of companies will give up and pass this out to DCA's. during the mean time you will get incesant phone calls and letters demanding you pay up. it will also take your credit file 6 years to recover.
out of your 13k i would imagine the max you could negotiate off this would be £100o-4000 depending on how many creditors you have.

*MF*

pania is giving you both sound advice and as importantly pointing out how being around here may help you even more in terms of getting the debt repaid quicker - I say this as someone new here - and am still astonished at the level of good advice (and help and support) that can be gained here.

But what prompts me to reply at all is when you said " I am fortunate in that I have been dumb enough to rack up 13k of debt but also earn good enough money to pay it off." Given that is your current situation, then pay it off, that will be far far better in the long run for you.

loopylu36

I was actually worried about starting my dmp in the current climate As more and more people struggle to pay, the more and more pressure there will be on banks to recover debts and whereas before they may have been in a better position to absorb these defaults, currently they are not. Don't for one minute think that I am on the side of the banks, but people like me who have got in a pickle aren't helping the current situation. Having said that, banks are of course businesses and must factor in losses on their budget sheets. Most people who are on DMP expect the lenders to stop all interest. If they do then great, but personally, so long as they are being reasonable (and most will reduce interest to a nominal amount) then i am happy to pay a small of interest if they are happy to accept my reduced payments and leave me alone. I can see how many people who can pay, are blaming those who can't but the key word in 99% of cases is "can't" which is a world away from "won't".

mountainofdebt

I've opened up to my mum regardin my situation over the last two weeks and as I said to her most people are happy to pay back their debts all they want is to be given a chance to do so.

When you're trying to fill an gigantic hole, the last thing you need is for someone to throw 3/4s of the spadeful of earth you've just put in back out.

System

Hi,

I am in the same boat as OP in that I have a lump sum available to me. Co-op have lost my CCA. Now I have to decide if defaulting to save around 7K is worth it.

I don't know either.