Getting on top of your finances
Most people will encounter financial difficulties at some point in their lives. Whether it is due to redundancy, divorce, or taking on too much credit, we can easily find ourselves struggling to pay our bills.
The most important thing to do to prevent your debts spiralling out of control is to speak to all your creditors (the people you owe money to). The longer you leave it before you speak to them, the worse the situation will become.
Many creditors will charge interest or fees to customers who are late with their payments, so the quicker you contact them, the sooner you can avoid these extra charges.
Each creditor will have a different policy for helping customers who are in financial difficulty, however, most follow a similar process. It is useful if you have a list of all your creditors to hand with the amounts you owe to each and how much you are paying them each month.
It will also help if you have prepared a list of all your monthly income and expenditure to determine how much you should offer as repayment to each creditor. Use our budget planner tool to help.
Working out your disposable income
Use our budget planner to understand your monthly income and expenditure figures. The difference between the two is referred to as your disposable income.
Working out your pro-rata payments
Once you have worked out how much you can afford to pay each month, you calculate how much you should pay each creditor.
You do this by offering each a 'pro-rata' payment:
- divide how much you owe each creditor into the total amount owed.
- this gives the pro-rata %.
- multiply your disposable income by this percentage to find the pro-rata payment.
In the example below:
- You owe your credit card provider £2,000 out of a total debt of £20,000.
- The pro-rata percentage is therefore 10% for your credit card provider.
- So - if your disposable income of £369 a month, multiply this by your pro-rata percentage (in the example above its 10%), which calculates to a monthly offer of £36.90 to your credit card provider
