Financial situation

What to do to clear your debt

1. Don’t make the mistake of ignoring demand letters or phone calls from unsecured creditors. Contact them as soon as possible ideally by phone first. Even if this is just to say that you want to work out a suitable repayment plan.

2. Discuss every conceivable option to allow you to pay the minimum amount possible based on your income and expenditure.

3. Always, always ask them to temporarily freeze the interest and late repayment charges as they are adding to your loan and because of this it can affect your ability to pay what they are demanding. Negotiate!

4. Ask them not to issue any legal proceedings until every available option is looked into.

5. Be honest about your present circumstances and calculate exactly the amount you can afford to pay after you deduct household costs e.g. mortgage, utility bills, family groceries and children’s costs. You need to work out how much you can afford to repay towards your loans and you should distribute what you can afford evenly amongst them pro-rata to how much you owe.

6. If you have lost your job you may have to appoint a debt-management company to negotiate to allow you breathing space to clear the debt.

7. Keep a record of everything, including phone calls from both sides. Ideally write to the creditor after agreement is reached by phone to document discussions properly.

8.Don't just handle back keys on the property you cant afford any more. When a property is voluntarily surrendered, the borrower loses control over the sale, added to which the costs of sale (solicitors, auctioneers etc) are generally greater than if the borrower were trying to sell it him/herself. It is also likely that the lender will get less for the house. Thus, what you gain in not incurring legal fees, you may lose in other costs