Once you have taken stock of your debts, before looking for an affordable loan, the first thing you should do is contact your creditors, that is, all the organizations to which you owe money (including gas companies, electricity, water and telephone). . You can do it on your own or with the help of a debt advisor.

The sooner you write to your creditors explaining that you are having financial difficulties, the more flexible and helpful they are likely to be. If you have already started receiving reminders and/or final demands, do not ignore them, contact the company as soon as possible to explain your situation. Your creditors may charge you some of the costs they incur to pursue arrears, so you risk exacerbating the problem if you do nothing. You are also more likely to face short stocks.

negotiating

For most people with serious debt, the very thought of asking your creditors to agree to freeze interest, reduce your monthly payment, or pay off a significant portion of it can be extremely daunting. It may surprise you to learn that there are many helpful tips and strategies that you can use in your negotiations with your creditors.

If you’re being pressured by creditors, who are issuing threatening letters and making phone calls demanding money, it’s easy to give in to their demands and offer them everything they’re asking for, even if you have no way of delivering on your fiancé. Don’t be intimidated into doing it. The first step in the negotiation process begins by writing a letter to the creditor outlining their position and making promises they can keep.

Write an effective letter

When writing to your creditors, always include the creditor’s name and address, your name and address (and your partner’s name if you both signed a joint credit agreement), and your account number. If a creditor has already written to you about the non-payment, include the creditor’s reference number. Attach a copy of your financial statement to show why you can’t pay or to support a reduced payment offer.

If you do not have money to make the payment, or if you offer only a token sum; For example, you can pay just £1 a month, you must:

• give reasons why you cannot afford to make the monthly payment, for example, you just lost your job, separated from a partner, or had an unexpected drop in income or increase in expenses
• refer to your budget statement to illustrate why you cannot pay the refund
• explain what you would like the creditor to do, for example, freeze interest and not accept payments for the next six months, or freeze interest and accept only a token payment
• ask the creditor to send you a payment book or standing order form (if you are making a payment offer).

If you are offering to pay your debt at a reduced amount each month (as calculated on your financial statement), also explain:

• that this is what you would like to do
• how did you calculate the reduced amount
• that you have calculated it on a “prorated basis”
• that you have treated all your creditors in the same way

Don’t be tempted to offer more than you think you can comfortably afford. Your creditor may well agree to reschedule payments (accept a smaller amount each month, paid over a longer period) or even settle for a much lower amount than you owe if they think your offer is the best they’re likely to get.

More comunication

Once they have read your letter, most creditors will be eager to contact you to discuss your situation and decide whether or not you have the means to pay them back. It can be very stressful negotiating with a creditor over the phone because you may feel pressured to make quick decisions. For this reason, it is usually best to continue negotiations by letter, and if your creditor contacts you by phone, ask them to respond to your letter in writing.

Keeping organized, up-to-date, and accurate records of your dealings with creditors is one of the keys to managing your debts effectively. Every time you contact a creditor by phone or in person, write a brief summary of the conversation noting pertinent details. You will be able to refer back to the notes you made if you have a dispute with your creditor at a later date. Add information about the payments you have made, the date you made them, and the reduction balance. This will allow you to see exactly what you owe at any time.

Debt management companies and free alternatives

Intimidated by the possibility of negotiating with their creditors, some people turn to debt management companies (DMCs) that offer to do it on their behalf, in exchange for a large initial fee and a portion of their monthly payments (usually 15%, plus VAT). In addition to taking the hassle out of dealing with creditors, these companies also promise to lower your monthly payments to an amount you can afford. Unfortunately, the performance of many DMCs leaves a lot to be desired. The way they approach debt often does little to solve their clients’ financial difficulties, and in some cases, the fees they charge can even make matters worse.

The main problem with debt management companies is that they sometimes ignore priority debts, such as mortgages, back rent, and utility bills. Clients are left to take care of themselves, while DMCs take care of non-priority creditors. His strategy is to reduce monthly expenses by spreading payments over a longer period and persuading creditors to freeze interest and fees. This may provide you with temporary relief, where creditors agree, but you are still responsible for the full amount of your original debt. You are also responsible for the DMC’s own charges, which are often substantial.

A common criticism of debt management companies is that they do not properly assess their clients’ financial positions. Some also fail to send payments promptly, damaging their customers’ credit ratings and leaving them exposed to high interest rates and fees. A reputable debt consolidation company is often where many people turn, and they can offer excellent solutions for some who are struggling to pay off debt.

Instead of paying for the services of a debt management company, most people would do better to turn to other sources of help. The Citizens Advice Bureaus (CAB), the Consumer Credit Counseling Service (CCCS) and the National Debt Line are free services that provide debt advice. Like debt management companies, CCCS and CAB can negotiate with your creditors to lower your monthly payments. National Debtline provides a self-help package that can help you put together a financial statement and list of creditors. They can then refer you to CCCS or PayPlan, another free debt management service. Other money advisors can be located through the Federation of Information Counseling Centers.