What happens to catalogue debt?

Catalogue shopping can seem like an easy way to spread out the cost of household items, clothing, electronics, furniture or more. But what happens when those ‘buy now, pay later’ purchases start piling up? If you find yourself struggling to keep up with catalogue debt repayments, it’s important to understand how missing payments can impact you financially.

This guide will outline what catalogue debt is, what happens to catalogue debt if you fall behind, and how to take control of your finances if you’re struggling to manage different types of consumer credit debt.

What is catalogue debt?

Catalogue debt refers to money owed to companies that allow you to order items from their catalogues and pay for them in instalments over an agreed period, usually around 12 months.

Some well-known catalogue retailers include:

• Littlewoods
• Very
• JD Williams
• Freemans
• Argos

This type of credit agreement allows you to spread the cost of purchases over time. Catalogue accounts are a form of unsecured debt – creditors do not take any assets as collateral when approving you for credit.

What happens to catalogue debt if you only make minimum payments?

When you take out catalogue credit, your account will have a minimum monthly repayment amount you need to pay. This is usually a percentage of your balance, for example 3-5%.

If you only pay the minimum each month, it will take longer to pay off the full balance. Interest is typically added to the remaining balance, so even as you make repayments, the total amount you owe may continue growing. This can make catalogue debt more difficult to get under control.

Making minimum payments also means you’ll end up paying significantly more interest over the lifetime of the loan. It’s advisable to pay more than the minimum if you can afford it, to pay off your balance faster and reduce the total interest paid.

What happens if you miss catalogue debt repayments?

Missing payments can have serious consequences. Your account will go into arrears, meaning you owe more than your scheduled repayments.

Your missed payments will be reported to credit reference agencies, which can negatively impact your credit score. This may make it harder to access credit in future, such as loans, car financing and mortgages.

Additional fees and higher interest rates may be applied to your account. Your creditors can transfer your debt to collection agencies who may contact you to arrange repayment.

If you still fail to make payments, your creditors have several legal options to recover the debt, including court claims, CCJs, attachment of earnings orders, charging orders against your home or even bankruptcy in some cases. It’s critical to communicate with creditors and try to avoid missed payments if possible.

What happens if you default on catalogue debt?

Defaulting on your catalogue debt essentially means you have failed to meet the repayment terms of your credit agreement. This may involve:

• Consistently missing monthly payments
• Only making partial payments
• Failing to pay off the full balance by the end of the credit agreement term

Most creditors will send a default notice between 3 and 6 months of missed payments or underpayments. They’ll give you at least 2 weeks to repay what you owe before your account goes into default.

When you default, your creditors can begin collection proceedings and take legal action. Defaults also damage your credit score as they remain on your credit file for 6 years.

This can make accessing credit much more difficult in future. You may be declined or only offered unfavourable terms like higher interest rates. It’s important to try to avoid defaulting wherever possible.

What happens if you return catalogue goods?

In the UK, you have a legal right to change your mind and return anything purchased online or through a shopping catalogue within 14 days. There are only a few exceptions, such as perishable and personalised items.

If you return goods purchased on catalogue credit, a refund will be issued for the amount you’ve already paid, and you’ll no longer owe the remainder of the purchase price.

Returning goods can help reduce your overall debt, but keep in mind that you are still responsible for paying any remaining balance owed on your account. Try to continue to make at least the minimum monthly repayments.

What happens to catalogue debt if you die?

If you pass away still owing catalogue debt, the outstanding balance does not disappear. Any unpaid debts will be settled from your estate (your assets and savings).

Funds from your estate will typically be used to pay off priority debts first, like taxes, mortgages, and funeral expenses. Any remaining assets will then be used to pay outstanding unsecured debts like catalogue balances.

Only the person who signed the credit agreement is responsible for repaying catalogue debt. So, if the value of your estate is less than the amount owed, the debt won’t be passed to your next of kin.

How to deal with catalogue debt

If you are struggling with catalogue debt, here are some tips:

• Review your finances to see where cutbacks can be made to free up cash for repayments.
• Try to stick to a strict spending budget to avoid the need to rely on credit.
• Prioritise paying priority debts first, such as rent, mortgages, council tax and other secured borrowing.
• Contact your creditors to explain the situation and request a more affordable repayment plan.
• Avoid taking on additional credit before existing debts are repaid.

If you owe money across multiple catalogues, credit cards and loans, consolidating your debts into one monthly payment can help make your finances more manageable. You could do this by taking out a consolidation loan, for example, or by starting a debt management plan (DMP).

How can a debt management plan help?

A DMP is an informal agreement between you, your creditors and a plan provider which aims to make repaying multiple unsecured debts more affordable. You make one monthly payment to a DMP provider, who distributes the funds between your creditors.

Key benefits can include:

A DMP can be a viable way of taking control of your catalogue debts without resorting to formal insolvency solutions. However, it may not be suitable for everyone, or for all kinds of debts. Seek professional debt advice and review your options carefully.

Get debt advice from DFH Financial Solutions

If you need help managing unaffordable catalogue debts as well as other unsecured borrowing, contact DFH Financial Solutions. Our advisors have extensive experience helping people across the UK to regain financial stability through customised debt solutions.

We’ll assess your situation thoroughly and provide guidance on the best path to repay your existing debts. If a debt management plan would work for you, we’ll explain your options and create a tailored plan. Apply online today to start taking control of your debt.