If you’re anything like the vast majority of those in the UK struggling with debt, you likely feel intimidated by the prospect of having to dealing with your creditors. Yet when approached with the right strategy, negotiating your debt with your creditors can prove to be an effective debt solution.
Here are our top tips for successfully communicating with your creditors (no matter how dire your financial circumstances may be).
Creditor negotiations tip one: Before making contact, create an income, expenditure and debt sheet
The very first step to dealing with your creditors to come to a realistic debt solution, is to work out how much you’ll be able to repay on a regular basis. To arrive at a figure, begin by creating an income, expenditure and debt breakdown.
Creditor negotiations tip two: Don’t agree to repayments that you know you can’t afford
With your income, expenditure and debt list completed, you’ll have a full understanding as to how much you can realistically afford to repay your creditors. Do not be tempted or pressurised into agreeing to an amount above this level.
Here’s how to approach your creditors:
- Write to your creditors – either by email or recorded delivery
- Include in your letter the basic details of your debt – such as your account number
- While you wait to hear from your creditors, you may want to begin making repayments at the offered amount (if you do this, be sure to point this out in your creditor letter – specifically stating that these repayments are being made as an offer of goodwill)
- If you’ve heard from other creditors, and they’ve accepted your debt repayment schedule, it’s worth mentioning this in your letters to other creditors (including photocopies of their acceptance if possible)
As a very general rule of thumb, creditors are accustomed to being offered between 50 to 75% of what is owed as a full and final settlement. However, with an ongoing repayment schedule, they are obliged to consider all offers, even if only a token amount.
Always bear in mind that lower repayments will mean a longer time period to repay the debt, and could result in ongoing fees and interest (creditors are not obliged to freeze fees and interest in an informal arrangement, although with some debts solutions – such as an Individual Voluntary Agreement (IVA) – they are).
Creditor negotiations tip three: If your creditor refuses your offer
Your creditors are under no obligation to accept your repayment schedule proposal. However, that’s not to say that you should either give up or agree to their demands.
If they refuse, write to them again and consider how else you could provide proof as to the repayments you can afford (such as photocopying proof of your regular income and expenditure).
Creditor negotiations tip four: Ask your creditors to freeze the interest on your debt
Remember – if you’re repaying your debts at a rate that doesn’t cover the interest on that debt, your overall debt level will increase unless your creditors agree to freeze the interest.
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Creditor negotiations tip five: Ask your creditors whether they’ll agree to remove the late payment marks from your credit file
Late payment markers will stay on your credit file for six years, so it’s always worth requesting that your creditors remove any negative markers placed on your credit history.
Creditor negotiations tip six: Keep calm
It’s difficult, we know, but remember – as a UK debtor you benefit from some of the most stringent legal protection in the world. Keep calm, stay composed and be fully aware of your rights (start with the government’s key guides on court claims, debt and bankruptcy).
Creditor negotiations tip seven: Know how to complain
If you feel that you have a reason to complain about your creditors’ conduct (for example, if they refuse to negotiate over your debts at all), you may want to speak with the following bodies:
- The Financial Ombudsman – which handles public complaints about financial organisations
- The Standards of Lending Practice – which deals with bank and building society creditors
- Trade Associations – the majority of trade associations have codes of practice that their members must follow. If it is found that your creditor has breached these terms, then you may have grounds for complaint.
It’s important to note that you must follow your creditors’ complaints procedure prior to contacting any of the above three bodies.
Creditor negotiations tip eight: Creditors still refusing to negotiate? Look into alternative debt solutions
If after following all our tips you’re unable to arrive at a reasonable negotiated debt settlement with your creditors, you should research alternative debt solutions. Start with our debt solutions page – which guides you through all of your options moving forward.
We are National Debt Help. We’re here to help those who are struggling with debt.
Our debt advisors can help you understand whether an IVA debt solution could pave your way to finally becoming debt-free. Talk with our debt experts today – call on freephone 0808 156 7718 or send our team a message via our contact page.