Arranging debt repayment plans with creditors

Use your budget to work out how much you can afford to pay your creditors. Read our guide to making a budget.

You need to share the money you have left over after your essential spending, as stated in your budget, among all your unsecured debts. Typical examples of unsecured debts are credit card debts, personal loans, catalogues, overdrafts and store cards

The most commonly accepted way work out how much to pay each creditor is to:

1. Work out the total amount you have to repay your debts each month
2. Work out what percentage of your total debt you owe each creditor
3. Divide your total based on what you owe each creditor as a percentage of your total debts

If any of this sounds daunting, don’t hesitate to get in touch with us for free and impartial debt advice and money help.

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. It’s recommended to send a written copy even if you come to agreement over the phone.

To support your offer:

1. Show your creditors how much you can afford to pay them
   Send each creditor a copy of your income and expenditure statement 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.
2. Explain why you’re currently unable to keep up with full payments
   It helps if your creditors understand the reason you’re struggling to pay, for example:

• You’ve lost your job or you’re on a reduced income
• Your living costs have increased
• You’re dealing with a ‘life shock’, such as divorce or separation
• You have an illness or mental health issue, such as stress or depression

I can’t afford to pay more than I’ve offered

If you’re sure the amount you’re paying is reasonable and it is all you can realistically afford to pay, carry on paying the amount you’ve offered. The payments should still be accepted and your account updated.

I think I can afford to pay a little more

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. This will help creditors see you’re working towards paying off your debts. It 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.

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.

If you’re able to pay off your debts, then that will almost always be a better option. But if making a large lump sum payment puts you at risk of struggling to pay for your essentials each month, a temporary repayment arrangement may be the safer choice.

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 you pay more, 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.