What happens if I default on an unsecured loan?

Question

Due to an unforeseen change in circumstances (my partner's illness), I had to quit my job and although I now work part time I will be , quite literally, left with £20 at the end of the month for us both to live on if I continue with my loan repayments to my bank. What can I do, since the bank, unsurprisingly, has been incredibly unsympathetic to my circumstances so far?

Answer 1

Going to court and credit blacklisting is really the last resort. In the first instance, if your accounts at your bank are still ok (i.e. not over your overdraft limit, etc) you should ask them to look at rescheduling the loan to extend the term. If that isn't possible, I don't know which bank you are with but they should be able to what is called a 'Managed Loan'. They discuss exactly what you can afford and re-do the loan on those lines to suit your situation better including consolidating any overdraft you may have. The downside to this is that you will lose your overdraft facility and be given a solo card instead of switch until the loan is repaid. If your situation becomes worse, you should consult the Citizens Advice Bureau and possibly look at an IVA agreement (Citizens Advice will explain this). Try not to worry too much, there is no reason this can't be sorted out leaving you with a bit more spare cash each month. Just make sure you communicate with your bank and persist if at first they don't seem to be too helpful.

Answer 2

You still need to talk more to the bank, they are the ones that can help you. CAB can help with debt councilling and maybe find otherways to extend the term of your lona. This will increase the overall interest but lower your current monthly payments.

Maybe try moneysavingexpert.com. This is the guy on the radio 2 every week, he often has ideas for debt management.

You need to avoid defaulting on your loan. Once you default any dredit rating you have goes through the floor for years. And if the bank start debt recovery it is unstoppable and very painful. You willloose a lot of your possessions if a balliff turns up, they will value your £500 TV at £20 etc....

Hope it turns out right or both of you.

Answer 3

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Answer 4

It used to be... that they sick a collection agency after you which would hound you but effectively had little power to make you pay. Lately... I see them going the extra mile and actually getting a judgment against you and if you think "oh well" I don't own a thing, what could they possibly get? Think again. One of my friends just got his checking account and savings account completely raided. They took everything plus now his checking account is overdrawn because pending checks that he wrote are bouncing. He knew they had a judgment... but didn't realize that his bank accounts are considered "property". The irony of the story? The credit card account was opened years ago by his now Ex-wife who forged his name on the application and didn't tell him about the credit card. And since the Ex doesn't even have a bank account... they went after him after she ran up the card and didn't make any payments. There is a whole new side to the Credit Card Crunch... the banks aren't very forgiving anymore and don't have the necessary cash cushion to just write off the defaulted accounts. And no... since they were married at the time she opened the account he has no chance to proof that he didn't sign for it.

Answer 5

There is not much you can do. If you dont make the payments they will take you to Court. If you attend Court they will probably make a Judgement Order against you, saying that you have to pay the money. However the Court will take you personal circumstances into account, and only make you pay what you can afford. You will however have a CCJ on your file, which will mean you will be very unlikely to get credit in the future.

I would suggest asking the Citizens Advice for some help, get them to talk to your bank for you.

Answer 6

people on here are talking of "blacklists" THERE IS NO SUCH THING!!! You are assessed for credit on your credit profile i.e. how you have conducted your credit payments in the past. Each finance company will assess this differently as each has a different credit criteria. 1 ccj will not prevent you from getting credit, but it will cost you a higher interest rate.
To answer your question write to your bank explain your circumstances make them an offer of a monthly payment you can afford and ask them to freeze the interest. If they don't want to co-operate talk to the citizens advise people, that sometimes carries more weight.

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Answer 9

Get another credit card before this default hits your credit report and pay off the first one with the new one. Look for one with smaller payments and don't use the card except in emergencies. You can do this repeatedly until your cash flow crisis is cured.

Answer 10

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