What is a Informal Repayment Plan?
- if you find that your debt is becoming out of control and you can no longer
afford to meet the required monthly payments, you may be tempted to borrow more
money (from credit cards or your bank overdraft) just to keep up the payments.
This process is known as “Robbing Peter to pay Paul”. You should avoid this at
all costs. An alternative may be to attempt a formal debt settlement
i.e. a debt reduction - this is where you contact all your
creditors and negotiate reduced monthly payments to fit within a budget you can
afford. An Informal Repayment Plan is
"an informal agreement with your creditors to reduce your monthly repayments to
an affordable level".
How Will an
Informal Repayment Plan Help? - the Informal plan gives peace of
mind as you know that you are starting to repay your debt rather than making
it worst by “Robbing Peter to pay Paul”. Depending on how much you can repay
each month, you may be able to repay your debt in full within a reasonable
time. However, at the very least, this plan will give you a breathing space
from your creditors while you concentrate your efforts on trying to increase
your earnings.
Who Can Use an
Informal Repayment Plan? - this solution can be used by anyone who
has a debt problem. However, they are generally suited to debts of less than
£15,000 with less than 4 different creditors. Ideally you should be able to
afford a total monthly payment of at least 1% of your total debt.
To understand the advantages and disadvantages of an 'Informal Repayment Plan'
please click here. There are twp methods of putting an Informal Repayment Plan in place. You
can deal with your creditors yourself and
negotiate your repayments. Alternatively you can use a
debt management company to negotiate and manage the agreement on your behalf.
Find out more about both
implementation options
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