The notice should give a fortnight or more to get up-to-date with your payments but if you cannot do this the creditor will default your account. This process of default notices only applies in the case of debts that are Consumer Credit Act regulated. These include hire purchase, personal loans, payday loans, store cards and credit cards.
What Happens Next?
If your account defaults your creditor will ask for the full amount of the debt to be paid. They may accept repayment of this in instalments but this is not always the case.
If you do not pay the debt, your creditor may take court action, pass the debt over to a specialist collection agency or apply for the court’s commission to take back hire purchase goods.
The Effects of a Default
Even if you repay the debt completely, a default will stay on your credit record for six years and can affect other lenders’ decisions if you decide to apply for more credit.
Some creditors will not even consider your application if there is a default on your file, whilst others will lend but with a higher rate of interest. According to the Step Change debt charity creditors will become less interested in a default with the passage of time.
Experts advise that any default notice should be taken as a serious sign that your debts may be a problem. If this is the case, you can source free debt advice from charities such as Step Change and the National Debtline, look at an IVA from Carrington Dean, or consider other IVA or alternative solutions to get your finances back on track.
Whatever route you choose to take, it is important not to bury your head in the sand. A default notice does not have to mean a life sentence on your finances but it can signal the start of greater problems if you fail to heed the warning and take positive action to turn your finances around.