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Arranging debt repayments with creditors

If you’re behind with payments or you just need some breathing space to take control of your finances, you can arrange debt repayments directly with your creditors.

You’ll need to put together an accurate budget first. Once you’ve put together a budget that’s manageable you’ll know how much you can realistically afford to pay towards any unsecured debts, after taking care of your essential living costs.

If you’re not in arrears with your creditors, you must try to keep up with your contractual payments, unless your budget suggests you can’t afford to continue paying the amount they want.

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How do I make a repayment arrangement?

Contact your creditors by phone, email or letter to tell them about your situation and to make an offer to pay the amount you can afford.

To support your offer, send each creditor a copy of your budget and a list of your other debts. This helps the creditor see that you’re only spending money on essential living costs and that the offer made is fair based on what you owe other people.

It helps if your creditors understand the reason you’re struggling to pay, for example because you’ve lost your job, you’ve got increased living costs, or simply that you’ve not managed your money well. It also helps to let your creditors know if you have an illness or mental health issue such as stress or depression.

Don’t be pressured into agreeing to a payment amount you cannot afford.

How much should I offer my creditors?

To work out how much to pay your creditors you need to share the money you have left over among all unsecured debt. Typical examples of unsecured debts are credit cards, personal loans, overdrafts and store cards.

The most commonly accepted way to share out the money is by working out the percentage each creditor can be offered based on the amount you owe each individual creditor.

What happens if they don’t agree to my repayments?

If you have room in your budget to be flexible, for example you can reduce some spending without being too unrealistic, you could agree to pay a little extra to your creditors. This will help them to see you’re working towards paying off your debts and could mean they’re more likely to agree to your repayment plan or stop extra charges being added.

For example, a realistic adjustment to your budget could be to temporarily reduce the amount you spend on clothing and footwear because it’ll only take you three or four months to catch up with your payments. As it’s a short term reduction you can probably get by with the clothes and footwear you already have.

An unrealistic adjustment would be cutting out some spending when you know you’ll have items to pay for, or cutting down so much that it’s not practical to live on such a small amount.

Only reduce spending where it’s possible to do so. If there’s no room to adjust the spending in your budget you mustn't agree to payments more than the amount you’ve already worked out you can pay.

If you’re worried about the actions your creditor can take to get you to repay a debt, you may find it useful to read more about what your creditors can do.

Will my credit rating be affected by repayments to my creditors?

If you’re paying less than the required monthly payment your credit rating will be affected and you’ll find it much harder to get further credit.

It’s normal for your creditors to try to contact you by phone, email or post to request payment, to bring the account up to date. They’ll eventually default your account and end the contract.

If this happens, you’ll no longer be able to use that particular credit, whether it’s a credit card, overdraft or store card. If it’s a personal loan then the creditor won’t give you any further credit until your existing loan is paid in full.

If your creditor records a default on your credit file, it will be affected for six years.

The only way to avoid a poor credit rating is to pay all your bills on time and clear any arrears you have immediately.

However, you should also consider how important your credit score really is. Do you need to take out any further credit? Are you planning to borrow more money, and why?

Free advice on arranging debt repayments with creditors

If you’re struggling to make payments to your creditor, borrowing more money could make your situation worse.

If you’re behind on your payments to creditors and haven’t received advice yet, we can help. Call our free debt helpline (free from all landlines and mobiles) and speak to one of our expert debt advisors.

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.

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© StepChange Debt Charity 2018