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DAS Example


Here is an example of how a Debt Arrangement Scheme could make your debts affordable:

Let say your unsecured debts
looked like this...

Credit Card: £4,000

Personal Loan: £19,000

Store Card: £5,000

Total Owed £28,000

Current monthly£1,100
payments

After a DAS...

New monthly£194
payments

New monthly repayment is based on affordability and varies from plan to plan.

Key information

Visit our FAQ Section for any in depth information on Debt Arrangement Schemes

Why Choose Us?

We are expert providers of Debt Arrangement Schemes. We offer free help and advice on debt solutions and can guide you in the right direction with regards to your debts.

 

Debt Arrangement Scheme

Reviewed by

Julian McGregor on Feb 08th.

""Superb advice and very knowledgable!!""

Rating: 5 5 star rating


 

See more testimonials here...

How does a Debt Arrangement Scheme affect my credit rating?

You may have read a lot about the Debt Arrangement Scheme (A Debt Arrangement Scheme) and thought seriously about going ahead and applying, but one thing is holding you back: your credit record. It’s no secret that many debt management solutions can affect your credit rating and you may be worried about what the future holds for you if you go ahead and it is affected. But do you know exactly how credit ratings work and why you are probably worrying unnecessarily about the effect A Debt Arrangement Scheme will have on them?

Just like many people have a wish-list of what they consider the perfect romantic partner, every lender has a wish-list of what they consider to be a perfect debtor. You start off with an ‘low credit rating’ and gradually points are added or deducted for various factors such as:

  • The amount of credit you already have
  • Your spending history and habits
  • Your current debt
  • Payment defaults
  • The interest rates you are being charged, as this is an indication of how credit-worthy other lenders see you.

Depending on whether you are over or under the lender threshold for a ‘perfect lending partner’ dictates whether you are given credit.

How lenders use credit ratings

Many people think if they borrow little and pay back everything they are a good credit risk and it would make them attractive to lenders. Nothing could be further from the truth! Credit ratings are actually there to a) assess our credit behaviour in the past and see if we have been good payers, b) to see if there is the potential to make money from us and c) evaluate whether we have sufficient assets for the lender to make a claim on if we default.

Someone who spends small amounts on their credit cards and pays off the balance every month generates little profit for their lender, and will probably not have much history to demonstrate the successful payment of a credit balance. This is not someone that a lender will believe they could make money from, and chances are they will have a low credit score.

If you carry a balance on your credit cards, but always pay on time every month, and you have never defaulted, you would be generating a tidy sum of interest to pay the lender and show your credit worthiness. That’s the kind of person lenders like and the debtor will usually have an average to high credit score. If you are a homeowner you may also find you are offered a higher amount of credit than someone who rents, as the lender can always make a claim on your property to get back their money if you default.

However, there is a fine line between a good risk customer and bad risk customer, and when you register for a Trust Deed or A Debt Arrangement Scheme, unfortunately you cross it.

The effect of the A Debt Arrangement Scheme on credit ratings

Unfortunately, the A Debt Arrangement Scheme scheme will have a negative effect on your credit rating because you are asking your lenders to accept a lesser amount of money over a longer period of time, which breaks your original lending contract with them and puts you in default


However, that is no reason to dismiss A Debt Arrangement Scheme as an effective debt solution. One way of looking at it is that you are in financial trouble and this will become all too apparent to a lender who looks at your credit rating. You may have defaulted on payments already, or you may have a far greater amount of credit than you should have compared to your income. If the latter is the case will only be a matter of time before you default if you haven’t already. Why? Because your interest payments will begin to rise quickly whereas the income available to make your monthly payments will not. Eventually your payments will be larger than the income available to pay them. The sooner you speak to someone about A Debt Arrangement Scheme before you miss payments and have that recorded on your credit record the better.

What happens to a credit rating when your DPP is complete?

Being on A Debt Arrangement Scheme will stay on your credit record for the duration of the DPP term and a few years. For a while after you make your final payment getting credit may be hard. This could be a problem if you need to obtain credit for a mortgage, and you would have to take steps to start rebuilding your credit rating before you started applying for mortgages. You must be prepared that it could take as long as three years or more for you to return to a good level where lenders will consider offering you credit again.

However you might find that it isn’t that important to you in the bigger scheme of things. With no more creditors hassling you, no more trying to make ends meet or living with debt-induced fear every day, for the first time in years you’ll have your surplus income to yourself and be so excited by the prospect of a debt-free future that you’ll never want to touch credit again.

For more information about credit rating and how A Debt Arrangement Scheme could affect yours, call to speak in confidence to one of our A Debt Arrangement Scheme consultants who will talk you through your options and point you in the right direction.

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