Getting out of the financial mess that I'm now in.

[Lookingahead]

I'm looking for advice on how to proceed with my debts.

I am 25 and my debts currently stand at €5,800 divided into:



-€2,300 student loan (Ulster Bank - was due to be repaid in full by September 2010)

-€1,600 overdraft (Ulster Bank - no payments have been made in 8 months)

-€1,800 credit card (Bank of Ireland - no payments have been made in 8 months)
















I was on job seekers allowance and could not afford to make any repayments.

At least one of the banks sold my debt to a debt collection agency (Cabot Financial).

I stuck my head in the sand and didn't contact the bank, return either their calls or Cabot Financials calls and moved house and didn't update my bank account details and my Ulster Bank current account has been suspended (found out through ATM).

I am now in a position to pay off the debt in a lump sum.


Obviously my credit rating is in the toilet and I have to start rebuilding it. If I start building savings and have money going through the banks how long before my credit rating is in good standing? Do the banks and building societies share this information with eachother?


Regarding the debt that has been sold to Cabot Financial - I understand that they buy the debt at a large discount and can settle for less than the full amount. What is a good guideline for what they will settle for?
If I were to go into the bank and pay them the full amount would this have much bearing on my future risk profile for a loan/mortgage application or will they pass the full amount onto Cabot Financial?


After basically not responding to the banks for a long time and having them selling on my debt will they write me off as a potential loanee in the future?


After getting my accounts in the black what are the tricks to get becoming more reliable in the eyes of the bank?



Regarding credit cards just to clarify, in general, at the start of the month my balance is €0. I make €500 worth of purchases during the month. If I settle the €500 before the end of the calendar month I don't accrue any charges?

 

[so-crates]

The ICB will hold details about the loan repayments for 5 years after the debt is discharged in full. While your credit card debt may be on there I think they don't hold details on overdrafts. I would suggest you request a copy of your credit report from the ICB (www.icb.ie) to see what is on there. Banks and building societies, hire-purchase companies and some credit unions both supply information to the ICB and check your credit history there.

I don't know how settling at a discount with a third party will be reflected in your credit history but I suspect it would not be in your favour.

I am at a loss to understand how you can have a debt of €1800 on your credit card and yet say you start each month with €0 on it and pay it off in full - how does that work? Basically the money you pay off will go off the underlying debt first not new purchases.

 

[horusd]

Are you aware that the owed amounts are full and final? In other words no penalties or add'l interest applies that would increase the total amount you owe?

Regarding negotiation on the sold debt, I have heard of this happening, and perhaps it can be done. But, in fairness you borrowed the money and the bank is entitled to expect you to repay it on the terms it was lent to you. And, given that you can do this, I think you should do this. Negotiation of debt is morally at least, the provence of those who have no other choice. But I 'm sure you'll make you own mind up on this.

You say the CC hasn't been paid in eight months. Is the card cancelled? Are you intending to pay it in full and start again with a 0 balance? Your post is unclear as to whether you are making a statement or asking a question.

 

[Lookingahead]

My credit card balance is €1,800 and I am intending to pay this in full and start again.

Morality aside, I am curious how settling for a lesser amount with the third party collection agency will affect me in the future and in dealings with the bank.




so-crates: The final point was just a general question about credit card interest and penalties.

 

[frostie]

My credit card balance is €1,800 and I am intending to pay this in full and start again.

Morality aside, I am curious how settling for a lesser amount with the third party collection agency will affect me in the future and in dealings with the bank.




so-crates: The final point was just a general question about credit card interest and penalties.

When you settle a debt for less than the amount owed, it is marked as a 'partial settlement' on your credit file. It means that that's the end of it as far as the creditor concerned, even though you still owe a balance, although there will be no further comeback from collection companies etc.

As long as you can establish that you cannot make a repayment proposal, but can offer a lump-sum settlement (they will want to know where the money has come from, ie no further borrowing from a lender - best if money given from a family member or one-off windfall) they will negotiate terms. I know from experience that Cabot are one of the easier ones to deal with regarding settlements and have negotiated a quite a few with them. Just be careful when you are putting the agreement in place that is IS the end of the matter.

www.frost.ie

 

[so-crates]

so-crates: The final point was just a general question about credit card interest and penalties.

Ah, makes more sense, it wasn't clear when you said

in general, at the start of the month my balance is €0.

it seemed to contradict what you'd already said.

If you clear the balance by the due date on your bill then you will not be charged interest. The due date does not have to be the end of the calendar month, it is on your statement.

 

[frostie]

Regarding the debt that has been sold to Cabot Financial - I understand that they buy the debt at a large discount and can settle for less than the full amount. What is a good guideline for what they will settle for?

Just a note that just because Cabot are dealing with the debt, the debt has not necessarily been 'sold on'