If you have settled default accounts you CAN get a loan or mortgage because lenders can see you have made good on your previous liabilities.
If you have defaults of relatively small amounts we have some mortgage and loan lenders that are willing to ignore these completely.
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As many have done before you, you made some mistakes concerning your credit and defaulted on some cards or loans when you were younger. However, now that you are financially stable, you are considering paying off this debt before falls off your report.
Will this have a positive effect on your credit or are you still going to have trouble securing financing, such as unsecured loans, unsecured credit cards, and a mortgage?
Many people are facing this dilemma as they get older and more financially secure. Your bad credit may force you to rent instead of being able to secure a mortgage. You are forced to pay cash for everything instead of being able to use a credit card and pay off the debt at the end of the month. Let’s look at this problem from different angles.
The balance of the debt can play a significant factor in how all of this is handled. The second consideration is in how long it is going to take the bad credit to actually fall off the report. For instance, do you really want to pay £15,000 in debt if it is due to fall off the report in the next two months? Are there any actual advantages to this?
Settle Up If At All Possible
If the debts are fairly fresh and have minimal balances, it would be more beneficial to pay them off instead of waiting for them to fall off. If, for instance, the debt has four years remaining and it is under £1,000 pounds, your monthly budget may not be hit too hard by making a payment. Furthermore, you may actually be able to settle the debt for a fraction of the actual debt.
Be Prepared To Make Contact
Contact the company and let them know you are looking for a settlement figure to satisfy the debt and have it paid in full or would like to work out a payment plan. Instead of dealing with a collection agency and receiving £25 for every £100, the credit may offer you a payout figure of 50 percent of the actual debt.
They are also more likely to give you favourable terms instead of taking the payment plan, as they can finally remove an account that was in default instead of eating the full amount of the debt.
Don’t Be Too Hasty
If the debt is significant and is about to fall off, the wiser choice may be to just allow nature to take its course. As we mentioned above, if you have already been penalised for 58 months, why not just wait two more to allow the debt to pass. The money you are losing on rent is surely less than what can be gained by paying off a five figure debt.
Settling defaulted accounts really relies on the particular situation. Write everything down so you have the actual numbers in front of you and figure out what is more financially feasible and beneficial to your situation. If a small debt is preventing you from getting a mortgage, by all means, pay it off.
If, however, the debt is about to fall off anyway and is a significant amount, you may want to rethink paying it off, as you have already been penalised for almost six years.