Money Talk - Debt mostly.

[plowsie]

Been looking recently to get myself a loan to try and make things a little easier on myself, but of course, the banks are not very helpful. These guys have given me a call. Offered me an option, wherein I extend the term and would be paying this amount off for the next 10 years and half my current payments. I have the option to pay more (more than likely I wont though).

These guys call themselves a debt recovery agency, so, my question, I am tied in with them for 12 months if I was to accept, would signing up to these people, seriously affect my credit rating? As in, if I ever looked at renting/buying a house will this leave a black mark, if in a years time I decide I want to get back into the payments I am currently paying and want to get out of this debt recovery agency to make payments a lot shorter, will getting a loan be a lot harder?

[timwilky]

If your debts are that bad

1) good for recognising you have a problem and deciding to do something about it.
2) get professional help. Not from somebody who will make serious money from your debt

[Bluefish]

10 years! That's a bloody long time, I say don't do it, but not a lot of info to go on.

[Grinch]

Talk to the Consumer Credit Counselling Service, not a Debt management agency as they normally impose a fee, which could be going towards your debt. All the stuff they do you can do yourself as I have done.

[Sudoxe]

If they cold called you, don't touch them with a barge pole.

[lily]

Plowsie, drew has a lot of bad debt from previous relationship and university. When he first knew he had a problem he went with Baines & Ernst (http://www.bainesandernst.co.uk/?gclid=COaLqsW1tZ8CFRth4wod8Gcxyw) they spoke to all his creditors and arranged monthly payments and to freeze the interest on the credit cards and loans. They orginal calculated it would take about 12 years to pay this all of. For them arranging this they took about £30 per month of what drew paid them before sending the rest of to the creditors.

About 18 months ago, drew said he was going to stop them doing it and manage it himself. The £30 split over the creditor, and now we are snowballing them, when he has finished paying one off, he rolls that full payment onto somebody else, until he has the largest one left with the full amount being paid.

The way it is being paid now means, Drew will be debt free in 2 and half years. This taking only 7 and half year, unlike what he was original advised.

I must say however, drew does have a lot of problems getting accepted for things, however this was due to the original defaults on the creditors rather than being with Baines & Ernst

(I know Drew will have no problem with me saying this)

[-Ralph-]

Just for clarification

These guys call themselves a debt recovery agency

= is equal to

somebody who will make serious money from your debt

Take a look at the amount you will owe, versus the amount you will pay monthly, times the number of months you will it pay for (120?) and the difference is how much money they will make out of it. They are not in it to help you, they are in it to make money. That doesn't mean you shouldn't use them, but it has to be on your terms in respect an interest rate and term of loan, that you are happy with and matches the best you can get elsewhere (but if you can get it elsewhere, why use them?).

Paying off monthly as much as you can afford and getting out of the debt quicker is the best course of action. A bank loan may be the best way to do this, because you can send a cheque to pay off your debts to each debtor and only have one repayment to manage, at a small cost which is the banks interest. But if they won't give you one, you may end up having to go to the likes of a debt consolidation loan and it may work out so expensive you are better off trying to manage each debtor individually.

If you decide to manage each one individually, you can see your local citizens advice office and show them all the debts you have. They will help you draft letters to the companies who you owe money to, stating what your income and outgoings are, including other debt repayments, and offering to pay the debt at a monthly or weekly rate which you can afford. Your debtors have an obligation to allow you to make such repayments, though they will probably freeze any other credit, ie: they won't lend you any more money, until it's paid. Whilst you are sticking to an agreed payment schedule they cannot register a default if they haven't already done so, because they have agreed a new payment schedule and you haven't yet defaulted from it. They also can't take you to court and land you with a CCJ. If it's going to take you a stupid amount of time to pay, you may find your debtors just write half of it off. Managing individually though means you must get standing orders or direct debits set up to take the money out as soon as you get paid, because if you try to pay manually to many different debtors, you'll screw up at some point and get issued with a default and/or a court summons.

Getting out of debt also requires a culture change on your behalf. Discipline! If you can't afford it you manage without it, ie: don't take on any new credit. Make payment of your rent, bills and debt repayments the most important thing in your finances, whatever happens pay them first, having an "I can't afford to pay it this month" approach is what gets you into trouble in the first place. I don't know how many times I've sat in a pub and heard somebody say, "I couldn't afford to pay the mortgage this month", where is what they should be says is "Sorry mate, I can't afford to come down to the pub tonight, after I paid my mortgage this month I had nothing left". Reverse the priorities. Never ignore any letter, open the envelope, face the problem and communicate with the debtor.

I'm not 100% sure about the effect of a loan from a debt recovery agency on your credit record. It will show on your record that you made the finance application, but I don't know if a bank manager could then see who that application was to if he was reviewing your record for a mortgage application. Lots of different finance applications will lower your score, so don't apply for credit on a no obligation basis just to see if you are accepted, only apply when your pretty sure you want to go down that route.

What you need to avoid for the future is defaults as a result of not making agreed payments, or a CCJ as a result of being taken to court. A debtor will try to take you to court if either you default several times on an agreed payment plan, or if you don't communicate with them.

Getting a credit card from a company Capital One, setting it up so it is automatically paid in full each month, and then using it for one of your fixed monthly expenses ie: food, or petrol, is a good thing, because it shows that you can have a credit card and manage it well.

If you're too far in the **** to manage it yourself, and the citizens advice can't offer any more help, get a solicitor who specialises in debt issues involved, they understand the system and know how to play the game, far better than you ever can. They could get debts written off, without affecting your credit record, although that debtor will probably never lend to you again. They will know how you get the debts cleared, in a manner you can afford, without risking your credit record.

[-Ralph-]

The way it is being paid now means, Drew will be debt free in 2 and half years. This taking only 7 and half year, unlike what he was original advised.

Buy a bottle of malt or a bottle or Fizz, and stick it to one side. Open it the day you get debt free, it feels great! :D

It took me until I was 30 to get debt free after University where I lived on 6 or 7 grand a year for 5 years. When I got there, the money I'd become used to paying towards debts every month covered the the 0% credit on the SV, that was my first credit taken since I finished Uni. Now other than my car and mortgage, nothing gets bought on credit unless it's a 0% deal.

[Well Oiled]

This site is best for anything and everything related to money. Saved me £1000's over the years. Debt management is no exception.

http://www.moneysavingexpert.com/loans/debt-help-plan

Cheers Keith

[plowsie]

Plowsie, drew has a lot of bad debt from previous relationship and university. When he first knew he had a problem he went with Baines & Ernst (http://www.bainesandernst.co.uk/?gclid=COaLqsW1tZ8CFRth4wod8Gcxyw) they spoke to all his creditors and arranged monthly payments and to freeze the interest on the credit cards and loans. They orginal calculated it would take about 12 years to pay this all of. For them arranging this they took about £30 per month of what drew paid them before sending the rest of to the creditors.

About 18 months ago, drew said he was going to stop them doing it and manage it himself. The £30 split over the creditor, and now we are snowballing them, when he has finished paying one off, he rolls that full payment onto somebody else, until he has the largest one left with the full amount being paid.

I must say however, drew does have a lot of problems getting accepted for things, however this was due to the original defaults on the creditors rather than being with Baines & Ernst
That is pretty much the same sort of thing that has been offered to me. Over the total period, the company will have made 23ish% out of what I have in debt. They take a specific amount from me each month and pay the remaining off what I will pay to the creditors.

I don't get the second bit though. Are you not with the company anymore but are still using the rates that they got you?

I would rather have problems being accepted for credit, with hardly any under my name currently. At the moment, I am into 5 figures, and want to shift it in the next <5 years really. I have no real problem going into the real figures if someone can offer me advice, because hey, this is debt.

When I asked Natwest for a loan (who my loan is already with), they declined my application for a loan of the amount I owe but a shorter term. Looking into things I am paying a stupid rate of interest also.

Thank you to those who are offering advice etc.

[lily]

Yes drew used the company for his benefit to get the payments down and interest frozen left it like that for about 4 years and then contacted each creditor himself and said currently with B&E and you froze my intrest, if I leave them will you retain the 0% and for that you can have x much more a month. All where happy to do that only one wanted to apply an intreset which is 0.01% so peanuts in the scheme of things.

Drop Drew a PM he will explain it better I think

[Mr Speirs]

There are government backed companies out there that will help you out. Get on directgov im sure that will be more helpful.

[Jabba]

Plowsie - you need to go into this with your eyes wide open..... rabbit in headlight stuff.

Firstly, make absolutely sure that you're not inadvertently signing up to an IVA (coz it sure sounds like you might be if you sign). This will seriously affect your ability to gain credit/loans/mortages in the future. Sure, if there's no alternative then maybe it is for you, but either way you need to take independent advice first. Tim Wilky's advice is correct - try to use your money to pay off your debts rather than pay someone to manage them for you.

Secondly, talk to your creditors. They often helpful.

Thirdly, and don't laugh, the Citizen's Advice Bureau offer a free debt counselling service. Try it. You might be a lot better off afterwards.

[-Ralph-]

Are you not with the company anymore but are still using the rates that they got you?

Your debtors are obliged to accept any payment plan that you can honestly demonstrate as being what you can afford to pay, after all if they take you to court it will cost them a fortune, and the court will only award what you can afford to pay anyway.

When B&E negotiated Drew's payment plan, they did exactly this. But Drew would still have been liable for the debt, and the agreement to repay would still have been between Drew and the debtor. B&E are just managing the debt, giving you one single monthly payment, and taking a commission. They are essentially a broker. If Drew then dumps B&E and decides to deal direct, there is no reason why the rate at which he is making his payments would change, he is just cutting out the middleman and the middleman's fee.

The advantage of a loan if you can get one and you are prepared to pay the interest for the convenience, is that you don't need to manage multiple payments or do any negotiation with debtors. You pay them off and get a fresh start paying a single monthly repayment to the bank, and don't worry any further about your credit rating (so long as you don't take on any new credit!)

The Citizen's Advice Bureau will teach you how to do exactly the same negotiations with your debtors that B&E did for Drew. You don't actually NEED a company like B&E, they won't get you a better monthly payment if you present your finances in the same way as them to your debtors, they are only useful because they have the knowledge to play the game. After they have negotiated the payments for you all they do is collect your convenient single monthly payment, and pay out to your multiple debtors, since this is all automated they do very little else except sit back and take your £30 quid month after month.

[-Ralph-]

Firstly, make absolutely sure that you're not inadvertently signing up to an IVA

Agreed, serious credit history bending stuff tthat stays on your record for 6 years.

Plowsie - Ignore this bit in terms of advice 'cos I don't know what I'm talking about here, it's a question. When I was dealing with negotiating my debt IVA's existed, but were not widely offered to consumers, these debt management companies were in their infancy and an IVA was seen as one step away from outright bankruptcy. But I thought there was a law whereby a debtor could only hold a debt against a consumer for seven years, after which time they had to write it off against provision for bad debts on their balance sheets. So if you paid £5 per week for seven years, and still had only cleared half the debt, the other half had to be written off anyway, no IVA required, and no impact on your credit history? Things might have changed.