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Setting up payment arrangement offers

A payment arrangement is a short-term agreement with the people you owe. It helps you catch up on payments you have missed at a rate you can afford.

Quickly find what you are looking for


  1. How to make a payment arrangement offer
  2. Making a budget
  3. Working out what you can afford to pay
  4. Making offers to the people you owe
  5. Common questions about payment arrangements
  6. Get debt free online advice

How to put together a payment arrangement offer

1. Make a budget

Before you can start making payment offers, you need to know what you can afford to pay. Making a budget will help you work this out.

You need to know:


  • How much money you have coming in
  • How much you spend on housing and bills
  • How much you spend on living costs like food, travel and clothes

Use our step-by-step guide to making a budget.

Your budget will support your case when making payment arrangement offers. You can send a copy to the people you owe using an income and expenditure form, also known as a financial statement.

2. Work out what you can afford to pay

At this point you should know how much money you have left over after bills and living costs. Next, you need to work out how to share this between the people you owe.

For this step, you will need to do some simple maths. We recommend using a calculator to make sure your working out is correct.

We have also included some examples for you to follow along with. Our examples will be shown in grey boxes.

Before you start, you will need to know:


  • How much money you have left over
  • How many debts you have
  • How much you currently owe to each debt (the 'outstanding balance')

Our example:

Let's say your budget shows you have £100 left over after paying bills and living costs. And you have three debts:

Debt Outstanding balance
Credit card £200
Overdraft £300
Personal loan £500
Total outstanding balance £1,000

Added together, these debts have a total outstanding balance of £1,000. Now we need to find out how to share £100 out between the three debts fairly.

Make sure you have your calculator for the next step. Using your calculator, you will need to:


  • Start by entering the outstanding balance of one of your debts
  • Divide (÷) this by the total outstanding balance of all your debts
  • Multiply (x) this by the money you have left over from your budget

This will tell you what you can offer to pay in pounds (£). You will need repeat this for each debt.

Our example:

Debt Calculation How much you can pay
Credit card 200 ÷ 1,000 x 100 £20
Overdraft 300 ÷ 1,000 x 100 £30
Personal loan 500 ÷ 1,000 x 100 £50
Total amount to pay £100

To check if your working out is right, add up how much you can pay to each debt. In our example, this adds up to £100. This is the same as what we had left over from our budget.

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3. Make your offer to the people you owe

The last step is to get in touch with the people you owe to make the payment arrangement offers. You can contact them by phone, email or letter.

We have a template letter you can use to contact them. It is best to send a written copy for evidence.

When you contact the people you owe, remember to:

Include a copy of your budget

Complete an income and expenditure form and send a copy of your budget to each of your creditors. This shows them that your offer is fair and based on what you can afford.

Let them know why you cannot keep up with full payments right now

Life happens. Creditors know this, so telling them what is going on in your life helps them understand why you might be struggling to keep up with payments.

Common reasons for money issues include things like:


  • Job loss
  • Cost of living pressures
  • Divorce or separation
  • Long-term physical or mental illness

With support from your GP, you can send a debt and mental health evidence form to the people you owe. This lets them know you are struggling with your mental health.

Common questions we get asked about payment arrangements

Some of the people you owe might reject your payment offer. But this does not mean they can reject your payments.

My creditors have asked me to pay more but I cannot afford it

Keep making the payments even if your offer was rejected. The people you owe should still accept the payments and update your account.

Learn more about what your creditors can and cannot do.

My creditors have asked me to pay more and I think I can afford it

You should only offer to pay more if you are sure you can afford it.

Be careful about where you try to save money when trying to add more to your payment offers. For example, choosing to spend less on food will likely be more harmful to you long-term than paying a little less to the people you owe.

Paying off debt in one go is the better option if you can afford it. But this is not always possible.

You should not pay off a debt in full if it means you would find it hard to buy basics for a while.

Making monthly payments is a valid option and may be better for you in the long run.

Your credit file will be affected any time you pay less than what you agreed to when you took out the debt.

When you have missed payments, reduced payments, or defaults marked on your credit file, it makes it harder to get more credit in the future.

The people you owe will try to contact you and ask you to pay more to bring the account up to date.

If you cannot pay, your account will eventually default and creditors may close your account. This means:


  • You can no longer use the account
  • You will need to repay the debts in full before trying to get more credit from them

A default stays on your credit file for six years. Find out more about default notices.

We can help you with free debt advice

You don't have to struggle with debt alone. We are here to help and take some of the stress away.

Get help for free with our online debt advice tool. You can start, pause and pick it up again at any time that suits you. No waiting around for advisors or opening times.

Debt advice has no impact on your credit score. So you have nothing to lose, no matter what you choose.