Getting yourself organised
See if your creditors will accept a reduced payment
Creditors are not obliged to accept reduced payments, however, they are more likely to if they believe you are genuinely trying to sort out your financial problems.
At The Co-operative Bank, for example, we will always accept a reasonable offer of repayment as long as it has been calculated on a pro-rata basis and it reflects how much you can really afford. When an offer is very low, your account may be passed on to a third party to administer the arrangement as this is often more cost effective. Third parties should be dealt with in the same way as you would deal with your other creditors.
You should always be realistic. Your creditors will almost certainly challenge any expenditure they consider to be excessive, however, most creditors will be reasonable in their assessments of your monthly outgoings. When working out your expenditure, it is advisable to make an allowance for emergencies, as you must stick to any reduced payment arrangement made with your creditors. They are unlikely to keep changing the arrangement if you break it due to unexpected bills.
Prioritise your debts
Ensure that you list any 'priority' debts in your expenditure rather than with your list of creditors as you would not be expected to reduce payments to these.
If you have a loan for a car, for example, you should check with the lender whether the loan is secured against the vehicle. If it is, check that you have repaid enough to prevent repossession if you ask to reduce your payments. If the car can be repossessed, then it should be treated as a 'priority debt'.
Work with your creditors
If your list of creditors is long, be prepared to supply photocopies of statements if requested. In order for The Co-operative Bank to agree to an arrangement, we will require copies of statements to other creditors as well as wage slips and proof of mortgage/rent payments. We will reduce or freeze interest in your account during an arrangement if your circumstances warrant it. Some creditors may also agree to reduce or freeze the interest on your account but you must ask them to do so and not just assume that they will. Check statements to make sure that this has been done.
Most creditors operate call centres and will prefer to deal with you over the telephone. This will help speed things up - and that is in everyone's benefit. Always ask for any arrangements that may be agreed to be confirmed in writing and take the name of the person you have spoken with, together with a date and time.
It is also worth keeping copies of any statements and letters that you receive and details of payments that you make during the arrangements (especially if you change how you make your payments).
Consider debt consolidation
Some customers find themselves struggling to repay their debts as they have over-stretched themselves with too many loans or credit cards but their income and other circumstances remain unchanged. One option that can be helpful is to consolidateyour borrowing (put all your debt into one loan and repay over a longer period of time). This solution is mostly available to homeowners as the lenders will be concerned about their extent of borrowing and will want some security to their loan.
Taking a secured loan or remortgage and using some of the equity to repay your loans and credit cards may be an option you wish to consider .....However, your home could be repossessed if you fail to meet the repayments so this option should not be taken lightly. If you feel that there is a chance that you may not be able to meet your repayments, you should avoid further borrowing, whether it be secured or unsecured.
