If you were in the shoes of a debtor who is struggling with the amount of month left at the end of your salary, agreeing a payment plan with creditors may feel like a commitment too far! After all, if you could afford to pay …you would! Right? But what if agreeing to a plan could make life a bit easier? A bit less stressful? Well then you’d certainly have to look into it, after all, we all want a little less stress in our lives. So how is setting up a payment plan, and keeping up the agreed payments, going to help?  

1. You’d stop calls, texts and letters which can often be over-whelming when you have multiple creditors or your debt has been escalated to a collection agency or law firm. The more you ignore them the more calls and letters you get, many agencies work on a commission only basis therefore they have the strongest motive to reach you and request payment. If this takes several weeks or even months, they are more likely to look for higher payments to cover the period of non payment, agree a plan early and they are going to agree an amount you can afford simply by asking a few questions about your finances and working out what you have as available income.
2. You don’t even have to manage the plan yourself. You can use a Debt Management Company (DMC) to represent you and they will sit down with you and go through all your bills and commitments to create a Debt Management Plan which they will send to all your creditors, most of whom will accept it as a true and complete record of your outgoings and income. Furthermore, you would make only one payment a month to the DMC who would then distribute your payment to your creditors, who in turn would deal solely with your representatives and providing they continue to receive the regular agreed payments should cease to contact you.
3. Making payments, however small, show on your credit file. Where a debt has been recorded with Experian, Equifax or Call Credit either as late or in default, your credit score is adversely affected, getting lower with each continuing month. Set up a payment plan and you start to repair your credit score. There may come a time, when things have got better that you’ll need it for something important.
4. Stop extra charges and Late Payment Fees. Depending on your contractual obligations, you may be subject to late payment fees or interest for the whole period the debt remains outstanding. Failing to contact the creditor and advising them of your circumstances, simply allows these charges to continue to rack up. If you call or write with an offer and make payment to prove you’re serious about paying, creditors will often agree to stop these extra charges on condition you don’t breach the agreement.
5. No further borrowing. One of the problems with consolidating your loans or refinancing is that although you’ve got the original creditors off your back, you now have a new one and you probably owe more than you did originally and / or you’re in hook for longer! Set a plan up that you know you can afford, that you’ve sat and worked out by adding up your income against your outgoings then you won’t be increasing your indebtedness.
6. You can build a rapport with your creditor or collection agency. I know, who’d have thought it!  But creditors only take further steps if they can’t reach an agreement, they don’t do it for the sake of and would much prefer to sort something out you can both live with. If you ignore it or make promises you can’t keep they will eventually lose patience and look for other ways to get their money such as using a debt collection agency or solicitors to issue proceedings. If you keep in touch, you have a better chance of being given leeway where you need it and maybe even salvaging your relationship with your creditor.
7. You may be offered a discount if you are a regular payer. If you come into some money and call for a final figure you may be given a discount for clearing the balance as recognition of your conscientious effort to clear your debt, you may even receive periodic offers during the course of the repayment period.
8. Peace of mind. Enough said!

  So, if you ever find yourself in dire straights and can’t meet your obligations to your creditor, tell them. They will appreciate not only your situation but the fact that you clearly want to sort it out!