Posted: Mon Jan 07, 2008 10:22 pm
I would like to tel you a story about Mr and Mrs Debtor, They banked with Peter and Paul Home Banking Ltd.
Creditors loved Mr and Mrs Debtor, they never missed a payment and had good credit rating.
Mr and Mrs Debtor used the credit card to pay the bills and do the shopping and if cash got a bit tight they would put the card in the hole in the wall that was provided by the creditor to get the cash required, and if things got really tight they would use the card to make payments to other cards. Just so things stayed up to date, while paying min payments to everyone and moving debt around, kept evey one happy.
This went on for a while then Mr and Mrs Debtor sat down and had a look at their situation. They made a list of all the Credit card/loans and the overdraft.
Mr and Mrs Debtor looked at a statement which had a £2,200 balance on it So, using an MMR (minimum monthly repayment) of 2%, it will take you almost 32 years to clear your original debt of £2,200, and cost you a grand total of £5,825… They then thought what would happen if they increased ther MMR by a fraction to 2.5% that knocked more than a decade and £1,442 off your long slog. Furthermore, bumping up their MMR to a more sensible 5% will bring down your repayment period to less than nine years, and reduce your interest bill to a more modest £739.
If they did increase the payments with all the cards they could not afford to live and if they stopped using their cards all together they could not even meet the min payments required from their income.
The problem was as they did not have arrears what would the Bank of Peter and Paul Ltd say if they tried for an IVA
Dave Beech
Creditors loved Mr and Mrs Debtor, they never missed a payment and had good credit rating.
Mr and Mrs Debtor used the credit card to pay the bills and do the shopping and if cash got a bit tight they would put the card in the hole in the wall that was provided by the creditor to get the cash required, and if things got really tight they would use the card to make payments to other cards. Just so things stayed up to date, while paying min payments to everyone and moving debt around, kept evey one happy.
This went on for a while then Mr and Mrs Debtor sat down and had a look at their situation. They made a list of all the Credit card/loans and the overdraft.
Mr and Mrs Debtor looked at a statement which had a £2,200 balance on it So, using an MMR (minimum monthly repayment) of 2%, it will take you almost 32 years to clear your original debt of £2,200, and cost you a grand total of £5,825… They then thought what would happen if they increased ther MMR by a fraction to 2.5% that knocked more than a decade and £1,442 off your long slog. Furthermore, bumping up their MMR to a more sensible 5% will bring down your repayment period to less than nine years, and reduce your interest bill to a more modest £739.
If they did increase the payments with all the cards they could not afford to live and if they stopped using their cards all together they could not even meet the min payments required from their income.
The problem was as they did not have arrears what would the Bank of Peter and Paul Ltd say if they tried for an IVA
Dave Beech