I took out a £12,000 loan with Creation Finance last May and I am currently paying £346/month on the loan along with a capital one credit card repayment at £90/month (£2080 0utstanding), a credit union loan at £105/month (£2300 outstanding).
However I am really struggling to keep up with the Creation Finance loan and could only afford to pay £100 last month. (They have been calling me daily and written several letters of demand since).
When I spoke to them a month ago, they said something about a six month arrangement but this would adversely affect my credit rating and I didn’t quite understand them anyway.
Please advise what I need to do as I simply cannot afford this monthly payment for now and would need some kind of ‘break or relief’ for at least six months to put my finances in order!
Are there template letters I can use to write to them to give me a break?
The loan is for 48 months and I tried to get to increase the term to 60 months but they bluntly refused.
What do I need to say to Creation Finance to get a break without incurring punishing interest charges.
Thanks in advance.
There are no template letters for this.
I suggest you write to them explaining you are currently in financial hardship and cannot afford to keep up the full payments each month, therefore you are requesting either reduced monthly payments at [whatever you can safely afford along with your other payments], or a 6 month holiday in payments to get your finances sorted out, before resuming the full amount, or as close as you can afford.
Under FCA regulations firms must treat customers in financial difficulties, arrears or default with forbearance and consideration, as per:
Dealing fairly with customers in arrears or default.
7.3.2: When dealing with customers in default or in arrears difficulties a firm should pay due regard to its obligations under Principle 6 (Customers’ interests) to treat its customers fairly.
Forbearance and due consideration.
7.3.3: Where a customer under a regulated credit agreement fails to make an occasional payment when it becomes due, a firm should, in accordance with Principle 6, allow for such unmade payments to be made within the original term of the agreement unless:
(1) the firm reasonably believes that it is appropriate to allow a longer period for repayment and has no reason to believe that doing so will increase the total amount payable to be unsustainable or otherwise cause a customer to be in financial difficulties; or
(2) the firm reasonably believes that terminating the agreement will mitigate such adverse consequences for the customer and before terminating the agreement it explains this to the customer.
7.3.4: A firm must treat customers in default or in arrears difficulties with forbearance and due consideration.
7.3.5: Examples of treating a customer with forbearance would include the firm doing one or more of the following, as may be relevant in the circumstances:
(1) considering suspending, reducing, waiving or cancelling any further interest or charges (for example, when a customer provides evidence of financial difficulties and is unable to meet repayments as they fall due or is only able to make token repayments, where in either case the level of debt would continue to rise if interest and charges continue to be applied);
(2) allowing deferment of payment of arrears:
(a) where immediate payment of arrears may increase the customer’s repayments to an unsustainable level; or
(b) provided that doing so does not make the term for the repayments unreasonably excessive;
(3) accepting token payments for a reasonable period of time in order to allow a customer to recover from an unexpected income shock, from a customer who demonstrates that meeting the customer’s existing debts would mean not being able to meet the customer’s priority debts or other essential living expenses (such as in relation to a mortgage, rent, council tax, food bills and utility bills).
7.3.6: Where a customer is in default or in arrears difficulties, a firm should allow the customer reasonable time and opportunity to repay the debt.
7.3.7A: (1) If a customer is in default or in arrears difficulties, the firm should, where appropriate:
(a) inform the customer that free and impartial debt advice is available from not-for-profit debt advice bodies; and
(b) refer the customer to a not-for-profit debt advice body .
(2) A firm may refer the customer to a not-for-profit debt advice body by, for example, providing the customer with a copy of the current arrears information sheet under section 86 of the CCA, or with the name and contact details of a not-for-profit debt advice body or the Money Advice Service; or directly transferring the customer’ s call to a not-for-profit debt advice body .
(3) In addition, the firm may provide the customer with the name and contact details of another authorised person who has permission for debt counselling, provided that to do so is consistent with the firm’s obligations under the regulatory system.
7.3.8: An example of where a firm is likely to contravene Principle 6 and ■ CONC 7.3.4 R is where the firm does not allow for alternative, affordable payment amounts to repay the debt due in full, where the customer is in default or arrears difficulties and the customer makes a reasonable proposal for repaying the debt or a debt counsellor or another person acting on the customer’s behalf makes such a proposal.
7.3.9: A firm must not operate a policy of refusing to negotiate with a customer who is developing a repayment plan.
7.3.10: A firm must not pressurise a customer:
(1) to pay a debt in one single or very few repayments or in unreasonably large amounts, when to do so would have an adverse impact on the customer’s financial circumstances;
(2) to pay a debt within an unreasonably short period of time; or
(3) to raise funds to repay the debt by selling their property, borrowing money or increasing existing borrowing.
7.3.14: (1) A firm must not take disproportionate action against a customer in arrears or default.
(2) In accordance with (1) a firm must not, in particular, apply to court for an order for sale or submit a bankruptcy petition, without first having fully explored any more proportionate options.
7.3.15: A firm should not make undue, excessive or otherwise unfair use of statutory demands (within the meaning of section 268 of the Insolvency Act 1986) when seeking to recover a debt from a customer .
All of which you can add to your letter if you wish.
Many thanks for this! Very handy indeed