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i The advice on this page applies to anyone with personal debts taken out in the UK.

My contractual payments. How do StepChange work these out?

Your contractual payments are important as they help us work out whether you need a debt solution and if you do, which one is best for you.

Here we'll explain how we work out the contractual payments for our DMP clients.

After we've put together your household budget we'll look at your contractual payment figures and work out whether you can afford to pay your creditors and if you can't afford to pay them, how much we'll offer each of them on a DMP.

Work out whether you can afford to pay your creditors. 

If you can afford to pay your contractual payments once you've covered all of the costs on your budget then that's brilliant. It means that with some careful budgeting you can afford to repay your debts and you don't need a debt solution.

If the amount of money you’ve got left over doesn't cover your contractual payments we'll recommend a debt solution for you, like a debt management plan (DMP). This means you can still repay your debts, but at an amount that's affordable for you. 

Work out how much to offer each of your creditors on a DMP 

We work out how much to pay each of your creditors using these contractual payment because it means that none of your creditors are treated better or differently to another. For example, if your contractual payments total £100 per month, a debt with a £30 contractual payment will get 30% of your DMP payment.

Overdrafts, store cards and catalogues

The contractual payment for these debts is 5% of your balance. This is an estimate of the amount you need to pay to cover your minimum payment plus extra to pay the debt off in a reasonable time.

For example, if you owe £3,500 on your store card we’ll put your contractual payment as £175.

The minimum payment on your store card, catalogue or overdraft might be different to this but we use 5% to make sure that all your catalogues, store cards and overdrafts are treated in the same way.

We use 5% as this is the average amount for contractual payments on overdrafts, store cards and catalogues across the industry. 

 Credit cards

The contractual payment for these debts is 3% of your balance. This is an estimate of the amount you'd need to pay to cover your minimum payment plus extra to pay the debt off in a reasonable time.

For example, if you owe £6,250 on your credit card we’ll record your contractual payment as £188 (3% would be £187.50 but we always round up to the nearest pound).

Your minimum payments might be lower than this but by using this 3% we know that all of your credit cards are being treated the same.

We use 3% as this is the average amount for contractual payments on credit cards across the industry. 

Payday loans

If you’ve got a payday loan the contractual payment will be the same as your outstanding balance.

For example if you’re payday loan balance is £450, your contractual payment will be £450.

This doesn’t mean that your payday loan will be treated as a priority; it just means we get an accurate picture of your situation and whether you can afford the payments you’re being asked for. Once you’re on a DMP the payment your payday loan receives will be based on 5% of the balance so they aren't treated any differently than your other creditors.

Personal, doorstep and short term loans and other debts

If you’ve got a personal loan or any other type of unsecured debt your contractual payment will be the amount you agreed to pay back each month.

For example, if you took a loan out for £10,000 and you agreed to pay back £200 a month when you took the loan out your contractual payment will be £200.

If your contractual payment varies we'll use an average of the different payments you've been asked to make. If you aren't sure what your contractual payment is then we'll use 5% of your balance instead.

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Helping you become debt free...

“I wish to thank your staff for all the great help they gave me when I was in so much debt.
They were a pillar of support to me.” (Leslie, Essex)

Foundation for Credit Counselling Wade House, Merrion Centre, Leeds, LS2 8NG trading as StepChange Debt Charity and StepChange Debt Charity Scotland. A registered charity no.1016630 and SC046263. It is a limited company registered in England and Wales (company no:2757055). Authorised and regulated by the Financial Conduct Authority.

*This is the average rating of our service based on the StepChange reviews on Feefo by DMP and DRO clients three months into their solution.

© StepChange Debt Charity 2016