full and final settlement
I owe £8,000 on one of my credit cards and thinking of offering them a lump sum, say £6,000 in full and final settlement. However, I wanted to know if the credit card accepted my offer, would it be registered on my credit file and would it affect my credit score.
Thanks
pinkbabytots Sun 05/10/08 21:13
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No credit card company is going to accept £6000 if they think that they can get £8000 plus interest.
They only offer to accept reduced 'full and final' payments in situations where they're making very little profit (or even a loss) from leaving the debt in place.
For example, I owe about £4500 on one of my cards and (because I'm unemployed, with occasional casual work) the lender has been accepting £15 to £20 per month (with no interest added to the loan) for ages. Since this doesn't leave them with any profit after inflation and inter-bank interest charges have been taken into account - in fact, it almost certainly means that they're losing money - they'd probably leap at the chance to receive a one-off payment of, say, £3500 (which they could then lend to someone else who could provide them with a profit).
However, I've only reached the position where the lender might accept a reduced payment after the point where my credit worthiness became non-existent.
Chris
PS: There's a similar post here:
http://www.theanswerbank.co.uk/Business-and-Fi nance/Question631091.html
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i Agree, if you are still able to pay, the credit card company would rather it took you 30 years to pay it off at the minimum payment acrruing interest than paying it off at a reduced amount in one go, it's how they make their money
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If you have £6000 available to you, it is probably worth using this amount to pay off some of your credit card balance anyway. It is unlikely that you will accrue a greater amount of interest on your savings than that you are losing on your credit card in interest charges. I would however, check the interest rates on your credit card and savings account first as I do not have this information available to me. The reduced balance would also appear on your credit file and may improve your credit score. If you decide to make a payment towards your credit card, after the payment has been made, register with www.experian.co.uk as you can view your credit report for free for 30 days. Make sure you cancel by then as they start charging after this period. It may also be worth transferring the remaining balance of £2000 to another credit card which offers a balance transfer rate of 0% for 12 months. Yes, the new company will charge a balance transfer fee of approx 2-3% however, you will save during the interest free period, as long as you can pay it off by the end of the interest free period. Hope this helps!
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Question Author
Thank you all for your answers they have been most helpful
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