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What is Persistent Debt?

If you've been notified about your persistent debt, you’re probably surprised. It's not a demand for repayment, but here's why you should take it seriously
A woman holding a persistent debt letter.

If you’ve received a notice saying that you’re in persistent debt, you’re probably surprised. After all, providing you’ve been making payments towards your debts on time, it might feel odd getting what feels like repayment demands.

Broadly, persistent debt means you’ve been paying more in interest, fees, and charges than towards the amount you owe for at least 18 months.

It’s a sign that your debt – if it isn’t already – might become unmanageable.

Persistent debt explained

The Financial Conduct Authority (FCA), in 2020, wrote to credit card companies, telling them they should review their approach to customers who are in persistent debt. The FCA told credit card companies they must support customers who have been in a cycle of persistent debt for three years or more.

If you receive a notice saying you’re in persistent debt, your creditor may:

  • Request you increase payments;
  • Inform you about the consequences of being in persistent debt;
  • Recommend getting debt advice or support to resolve your financial situation

Why would I be contacted about persistent debt?

You should have received a persistent debt notice if, for at least 18 months, you’ve paid more in interest and charges than you have towards your outstanding debt. Although this feels like a demand for repayment, this isn’t actually the case.

However, that doesn’t mean you should ignore the persistent debt notice. Instead, it’s time to consider doing something about your situation to avoid a larger financial problem in the future.

Isn’t paying the minimal amount a good thing?

Your minimal repayments are subject to legal requirements and are the smallest amount possible which creditors are happy to accept. Although these can help make your finances easier to control in the short term, it can get very expensive in the long run.

For example, if you have £5,000 worth of debt – at an interest rate of almost 20% – minimal repayments would mean you’re making payments of £50 while paying more than £80 in interest each month.

It doesn’t take much to see how this situation would become unsustainable as the months go on. Unless you increase your repayments, the idea of repaying the £5,000 seems very unlikely indeed.

Does persistent debt affect credit score?

In the short term, persistent debt shouldn’t affect your credit score as you’re making repayments on what you owe. If you start to miss payments, that will be a completely different story and your rating may be harmed.

Similarly, if your creditor freezes interest because you require additional support – or suspends your account altogether – this will probably adversely affect your credit score.

What happens if I can’t pay any more towards my debts?

If you can’t afford to increase repayments to reduce your persistent debt, this is a sign you may need debt help and you should consider a bad credit loan consolidation to repay your lenders and leave yourself in a better financial position.

One thing is certain though, acting early on your persistent debt situation should stop the matter from getting worse.

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What happens if I ignore persistent debt letters?

Initially, if you ignore persistent debt letters, your creditor is unlikely to take further action against you. However, you should receive an update on persistent debt around nine months after the first notice. This will be similar to the letter you’ve already received and will probably recommend increasing your repayments again.

If you ignore this letter, your lender will offer further steps to help you get on top of your financial situation. For example, they may recommend implementing a repayment plan or another debt solution. Alternatively, interest and charges may be frozen to ensure you make progress with repayments.

Ignore this letter though and that’s where matters can become serious.

Can my creditor suspend my account?

If you’ve ignored multiple persistent debt letters, your account and cards could be suspended – although you’ll still have the debt to repay. However, this may be the least of your worries. Potentially, your creditor could take legal action or pass your details to a collection agency.

An advisor speaking with a customer.

How to get out of persistent debt

Being in persistent debt – and not seeing a way to regain control – is a sign you may be struggling with your finances. As a result, you may be unable to reclaim control without help.

Fortunately, we often help people out of persistent debt and provide them with the funds they need to start repaying their creditors through one affordable payment each month.

We can do this through a debt solution known as a consolidation loan. If you qualify, you could have the money you need within 24 hours.

This means a problem which has lasted months could be solved within days. To find out more information, click the button below. Our friendly team is standing by and happy to help.

Apply for Debt Consolidation
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Unsecured Loan Representative 69.9% APR

Borrowing £7,500 over 36 months, repaying £502 per month, total repayable £18,083. Total cost of credit £10,583. Interest rate 69.9% (variable). The lenders on our panel offer loans for 12-60 months, with rates from 5.8% APR to 89.9% APR. The Representative Example is based on all loans paid out by lenders between 19th Apr 2022 and 23rd Dec 2022.

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If you choose to add fees to the loan: Assumed borrowing of £25,000 over 120 months, plus a broker fee of £2,500 and a lender fee of £250 would result in monthly repayments of £345.55, the borrowing rate is 8.6% (variable), the APRC is 11.7% (variable), total charge for credit £16,466.00 and the total amount payable £41,466.00. You can opt to pay the lender and/or broker fees upfront, your adviser will discuss these options with you.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it. All rates vary subject to loan amount, loan type and status. Repaying your debt over a longer period of time may increase the amount you pay.

Further reading

What are the Different Kinds of Unsecured Loans?

Understand what an unsecured loan is, and how best to use the different kinds of unsecured loans in 2023.

What are the Different Types of Secured Loans?

With so many different types of loans available, it can be difficult to know which is right for you. For more information on secured loans, read this expert article.

Persistent Debt – What Does it Mean for Your Credit?

Persistent debt can affect your credit rating for a significant time period. Read to find out more.