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.
When the Financial Conduct Authority (FCA) announced those in persistent debt should strive to increase their payments, banks and other lenders increasingly started contacting customers.
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
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.
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.
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.
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 consolidation loan 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.
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.
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.
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.