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Dealing with loan arrears
Credit in the UK is getting easier and easier to obtain and as a result more borrowers are finding they have too much debt and missed payments and loan arrears are increasing year on year. Whilst its easy to suggest people simply stop borrowing, in real life things aren't that easy. The majority of people we speak to are are in the situation they are in due to no fault of their own and many have had a one off event or an unlikely occurrence affect their financial circumstances which is very unlikely to happen again.
When unlikely things happen the first sign of financial difficulty is often when the odd payment is missed, a payment here or a payment there until things start spiraling out of your control. In order to minimise any damage to your finances and your credit rating, if you have not already done so then action should be taken when the arrears first happen. Many people feel to 
embarrassed to contact their creditors and explain they can no longer meet their current agreements but unless you know for definite that your finances are going to improve you should always be the one to initiate contact with your creditors.
Pre-empt the loan arrears if possible
If possible you should always pre-empt the arrears by letting your creditors know you are facing financial difficulty. By doing this and explaining your situation you may find your creditors will be able to adjust your monthly payments so the arrears are avoided all together.
If this is not possible and you have already missed payments on a loan, credit card or mortgage then its time to pick up the telephone and phone your creditors before they phone you. That will at least show your creditors you are acting proactively in a positive manner to try and stabilise and resolve any arrears on your account. Most creditors will be happy to try and resolve any issues before they become a major problem and if you keep calm and explain your situation in a logical and precise way they may offer to reduce payments or give you a payment holiday to help get you back on your feet.
My creditor wants the loan arrears paid straight away
This is normal for the creditor to ask for the arrears to be made up as soon as possible and if you are able to, it would be in your best interest.
If you are not able to repay the arrears straight away and you feel your creditor is not being as helpful as you would like then you do have some options.
Work out your disposable income to repay the loan arrears
Your disposable income is the money left over after you have met all your living costs, bills and any priority debts. Simply add up all your monthly income and subtract living costs, household bills and any priority debts (we have listed the main priority debts here), whatever is left is your disposable income (work your monies out monthly as its likely you will be paying your creditors monthly).
Once you have worked out your disposable income you should divide this up on a pro-rata basis around you creditors.
Pro-rata simply means the creditor you owe the most to get paid the lions share of your disposable income.
for example:
Creditor A = £3,000
Creditor B = £1,000
Creditor C = £500
Total (A+B+C) = £4,500
for this example we will use a disposable income of £100.
You would divide the amount you owe to each credit by the total amount owed then multiply by 100 to show that creditors percentage of the total debt, you would then allocate that percentage of your disposable income to that creditor.
This is the fairest way to divide your disposable income and it is more likely they will accept your payment arrangements if its done this way as they can see you are dividing your monies evenly, it is also the way the courts would work out how much each creditor should receive if you or the creditors approach the courts to help resolve the matter.
Speak to a professional debt advisor who can help with loan arrears
If you are unable or unwilling to work this out with your creditors yourself then you should speak to a professional who can do all the work for you. This would typically be a debt management company who can arrange an informal debt management plan but in extreme cases an Individual Voluntary Arrangement (IVA) may be the most suitable option.
Simply complete the form at the top of this page and we will call you back
