option in defaulting on loan due to ill health/UC

TC77 · 18 December 2019 at 8:55PM

Hi,
My daughter took out a loan when she was 19 with a main bank being lent around £7000 when she was earning 1100 a month but spending more due to her anxiety and vulnerability to give money to others etc. I'd told them about her anxiety when she was 18 as I'd saved a junior ISA £6400 for her and she spent this quite quickly. They could have seen that she was spending more than she was earning and that money not going on anything useful like a car. Loan was at 25%. The bank has taken 10 months to provide basic info to me (I'm an authorised 3rd party as helping my daughter as she's been v ill) and had loan on hold but said it can't stay any longer and will go to the recovery section. they've still not provided me with info on their policies and affordability checks. However, they've said that as her only outgoing was her mobile phone £39 was affordable.
I'm going to the ombudsman as I think they've made errors and surely, food, travel, clothes etc are outgoings and if she had any money left she would be paying me for lodgings. Shouldn't they have had regard to being a 3 year loan outgoing may change. She left home and had to pay rent, and also signed off sick as too ill to work and been on UC last year and now has PIP. Trying to go to college to then go to uni if well enough so 4 years before earning.
Is asking for it to be written off an option? or if defaults then will it mean she can't get a credit card or anything for 6 years.. She did pay some of the loan off in 2017 (asked me for money - I didn't know the interest she was paying) and then increased it but at 12.5%.
Any advice please.

[Deleted User] · 18 December 2019 at 9:29PM

It's not going to be written off but if she defaults, it will freeze the interest.

It will impact her credit file but that doesn't seem like the priority here.

If she can't afford it, the alternative is that you pay it off for her.

SnowTiger · 18 December 2019 at 10:50PM

According to the calculator at money.co.uk a loan of £7,500 with an APR of 25% over three years would cost £270 a month.

That would leave someone earning £1,100 a month with £830 a month to spend on food, travel and clothes. £200 a month for 'lodgings'(?) leaves £630 a month.

Daughter had a history that showed she took out a loan before and paid it off and we don't know what information she put on loan application form.

I'm not sure this amounts to irresponsible lending.

sourcrates · 18 December 2019 at 11:09PM

I don’t think obtaining further credit should be your top priority for her.
If the account defaults, the creditor will run through there usual range of standard collection letters, then the debt will normally be sold on to a debt purchasing company.

This may take a few months, could even be years, eventually the new owner will write to her, if there’s no luck with the affordability complaint, an affordable repayment plan, or a settlement offer, can all be worked out quite easily.

[Deleted User] · 19 December 2019 at 12:17AM

TBH I don't think the lender did anything wrong, after all they don't have a crystal ball.

TC77 · 19 December 2019 at 12:49AM

Hi
Thanks for replies. The lender was advised via their complaints process when she was 18 how they had dealt with her, and also in an email with another incident. I understand comments looking at figures. Also issue of pressure on her to borrow money from a friend which she won't admit as ashamed/embarrassed.
I don't want her to have more credit - was thinking in a few years if she'd be able to get a credit card. 22 now. She's waiting for supported housing as other health needs, and part of PIP is for her inability to manage money, and other issues. I asked lender for information in January about affordability checks and policies and they haven;'t provided it, said needed a DSAR which we did and didn't include all info but sent someone else's loan details! Also as 3rd party asked them not to write to her but they write to her and each time include an authorisation form which makes her worried that I haven't been talking to them.

Would a settlement offer be with the bank or with a company that has bought the debt?
If she manages to go on to uni would having a repayment plan affect her getting a student loan?

Many thanks,

boo_star · 19 December 2019 at 5:27AM

TC77 wrote: »

Hi
Thanks for replies. The lender was advised via their complaints process when she was 18 how they had dealt with her, and also in an email with another incident. I understand comments looking at figures. Also issue of pressure on her to borrow money from a friend which she won't admit as ashamed/embarrassed.
I don't want her to have more credit - was thinking in a few years if she'd be able to get a credit card. 22 now. She's waiting for supported housing as other health needs, and part of PIP is for her inability to manage money, and other issues. I asked lender for information in January about affordability checks and policies and they haven;'t provided it, said needed a DSAR which we did and didn't include all info but sent someone else's loan details! Also as 3rd party asked them not to write to her but they write to her and each time include an authorisation form which makes her worried that I haven't been talking to them.

Would a settlement offer be with the bank or with a company that has bought the debt?
If she manages to go on to uni would having a repayment plan affect her getting a student loan?

Many thanks,

Just have her pay back the money she owes. Being on benefits doesn't mean you can't afford to borrow money, and I'm sure some would argue it's against their 'ooman rights to be declined credit because they weren't working.

She needs to settle the debt with whoever now owns it and being in debt won't affect her going to university.

bris · 19 December 2019 at 3:09PM

You can't base mis selling on what might happen a year down the line, that is a ridiculous suggestion.

They lend on what's put in front of them and not expected to change for the term of the loan.

just another can't afford it so it must be their fault thread, no sympathy, borrow, pay back, it's simple really.

TC77 · 20 December 2019 at 1:10AM

Hi,
Many thanks, I'll contact Stepchange. I think she will agree a lower payment for the time being. My focus in on her getting better, sorry if people thought I wanted her to get more credit - just didn't want it to affect her in the longer term - don't want her to be able to borrow more as vulnerable to pressure to give others money.

option in defaulting on loan due to ill health/UC

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