so basically I had a barclaycard account which I couldn’t afford to pay because I lost my job to COVID And Barclaycard decided to register a default and close the account (Despite me being honest and setting a repayment plan immediately).
they’ve now sold the account to PRA Group who have offered me a partial settlement figure.
I can either fully settle the balance of £1,684 over 4 years of £40 payments, or I can partially settle it now for 3 monthly payments of ~£165.
would it make financial sense to just partially settle it now and save the extra money in the long term? because either way the default will be on my credit report for the next 5 years, but partially settling it reduces my overall debt level, even though it may look bad to lenders now.
im not looking to take out any mortgages etc for at least the next 7-10 years.
Really sorry that’s happened to you. That does seem a big disparity over the amounts, I guess they see the 3 payments as money in the bank vs what you might not pay in years to come.
If you can afford the £165 a month comfortably, I would do that so it’s done and gone.
Is there any sort of appeal process to get it removed?
Unfortunately Not, barclaycards thinking was that I was able to pay 1% of the balance (which is the minimum repayment) but I wasn’t able to pay the interest, so they basically said I broke my side of the agreement and defaulted me and sold me on to PRA.
I have added a notice of correction to my credit file explaining the situation but I can’t get it removed as barclaycard weren’t in the wrong for what they did.
PRA Group probably bought the debt for pennies, so either option is a profit for them.
I’d agree that 3 payments may be the best approach, rather than have it as a weight around your neck for the next 4 years. Make sure that this means it is settled in full and they cannot sell it on for the next agency to collect the remainder – I forget the proper terminology but the MSE site may be helpful for this.
I am pretty sure that they are legally required to freeze interest to help you pay but I don’t see anywhere to back that up.
I am also pretty sure that if you agree a repayment they can still register a default but I honestly didn’t think they could pass it to a debt collection company.
If you have made a reasonable repayment offer and stuck to it and yet they have still handed it to a debot collection company you should complain to ombudsman about their conduct
You may as well take the settlement offer. Your credit file will be rubbish either way but at least it’s cheaper. I had to do something similar back in 2014, credit files all clean now. For small things such as basic credit cards, phone contracts, after one or two years you’ll be fine. Bigger things like a mortgage will take longer.
You can ask them but they don’t have to accept I think and will often send it a debit collection agency. Thankfully the rules have changed around them.
I got into debt years and years ago and then defaulted on my cards, loan, overdraft when I was made redundant.
If you can afford to pay it off more quickly then do. It stays on your account for 6 years but once you’re financial stable get a credit rebuilder card and use it upto a maximum of 25% per month and pay it off in full most or all months.
It will have a higher APR but by using it, you’ll show that you can manage your credit and over time you can apply for better cards and so on.
Firstly - I’m sorry to hear this and hope everything is all ok now
As someone who works in borrowing - how barclaycard handled your situation doesn’t sound very fair to me. Without knowing your full financial situation and communications with them, I can’t be sure but the reason I say this is:
You got in contact to set up a repayment plan quickly. From this it sounds like you didn’t have lots of missed payments already when they defaulted you?
Last year if customers were struggling due to COVID then lenders had to offer customers payment breaks and give customers additional breathing space.
Independently from this - the number one thing to ask yourself is can you afford the £165 per month? I can’t offer financial advice but some context, if it helps; most lenders will have 2 hard rules for borrowing:
Don’t accept customers for borrowing if they’ve defaulted in the last X months (X is usually 12 - 24 months)
Don’t accept customers for borrowing if they have an outstanding default balance of greater than Y (Y is usually £250 - £3,000)
Customers who have repaid a default in the past are often perceived well within lenders predictive models as well.
