I took a 5k loan out with natwest around 4 years ago. I refinanced the loan in July last year to 13k to pay off a credit card & also to pay for a holiday/wedding (I was best man for my best friends wedding & had to pay for a room by myself in a 5* hotel in jamaica). On hindsight I should have just said I couldn’t afford it but at the time thought I would be able to pay it off ok & felt a bit pressured. 3 months ago I had to refinance the loan AGAIN!!! Now 17k 😥 I had a 4K balloon payment on car finance & needed to consolidate as ran up the credit card again.
I guess like a lot of people in debt, things have just spiralled out of control. To top it all off I have just lost my self employed work which leaves me £800 down per month. My loan repayment is £450pm & I also have a 4K credit card (£40pm – 0% interest for the next 25 months).
To date my credit score very good. I’ve had several items on finance & a few loans in the past which have all been paid off. I am now in the position where I am not going to be able to pay the loan next month. I am very stressed out at the moment & don’t have a clue of what to do. Please help!
Do I pay what I can afford & split it between the loan & credit card? Do I just keep up with the credit card payment & not pay the loan???
Any help would be very much appreciated.
Your choice on how you split any payments, but only pay which and what you can reasonably afford.
Or you can either use the letters or write and inform them you are in financial difficulties at the moment and request they accept token payments [again only what you can reasonably afford], until such times as your situation improves.
If you need help composing a letter of this kind should you decide to go that route, shout up and I will post one up for you, which will include FCA regulations concerning reduced payments and treatment of customers in financial difficulty.
Thanks for the quick reply Faljay.
If I stop paying & start the letters what’s the worst that could happen? Could I get a CCJ or bailiffs at my door? In the long run I don’t know if it would be best to not pay & go the 6 years with out any credit or pay as much as I can & still have bad credit well past the 6 years.
The income I lost I won’t get back again as I was managing a family friends rented properties. She has now put them all on the market to sell. Meaning my situation won’t be improving for the foreseeable future.
The worst that can happen is that any one of them take you to court, but they must win their case before they can take any enforcement action, which could include Attachment of Earnings or Bailiffs should you refuse to pay them anything or stop paying any repayment plan you made after they gained the CCJ. However, they may not necessarily win in court, as there are many factors dependant on this.
it also depends on the amounts involved. If they are not huge then they may well sell/assign the alleged debt/s to a debt collection agent/cies, who are easier to be rid of than the original creditor.
Any CCJ will drop off your credit file in 6 years and your credit rating will improve quickly afterwards.
If you prefer not to use the letters then you can contact the firm/s in question and tell them you are in financial difficulty and wish to make token payments until such times your circumstances improve. If you decide to do this I can post up a letter which will include the FCA regulations for treatment of people in financial difficulty. They should accede to your request and if not you can report them to the FOS and FCA, but after 6 months to a year they may sell to a DCA, again making the process a lot easier.
I’d appreciate it if you could send me the letter explaining I’m in financial difficulty.
Which option would put me in a better position with my credit score in years to come; pay the bank what I could afford (providing they agree to it) or not paying & getting a CCJ?
Here’s the letter:
FAO: customer Services Manager
I am writing in regard to the above account.
At the moment I am experiencing financial difficulties and can no longer afford to pay the minimum amount each month. I therefore request you accept token payments of [whatever amount you can reasonably afford], until such times as my situation improves.
Under FCA regulations, the following applies:
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: (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.
7.3.13: A firm seeking to recover debts should have regard, where appropriate, to the provisions in the Common Financial Statement or equivalent guidance.
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.
Enforcement of debts.
7.3.18: A firm must not threaten to commence court action, including an application for a charging order or (in Scotland) an inhibition or an order for sale, in order to pressurise a customer in default or arrears difficulties to pay more than they can reasonably afford.
Thank you for your time and attention and I look forwards to your favourable response.
I know it’s long, but you need to impress upon them your rights and their obligations under the FCA regulations.
Very much appreciated
Thank you Faljay
That is fabulous Faljay thank you! 😀
Good alternative 🙂