When debts start to mount up around you it’s easy to feel like you don’t have any options, or that nobody is on your side.
Without a payment plan in place or any idea how to get creditors of your back, you might even be considering last-resort options like insolvency or bankruptcy. These are certainly things to consider in some circumstances, however it’s important to look into other ways of getting help first – such as writing a letter to your creditors.
This is actually a surprisingly good tactic. While it’s easy to think of creditors as the enemy, in many cases they are willing to be flexible, especially if you’re able to offer some form of repayment. For them, having a debtor who is willing to engage and try to find a way to pay some money back over time is likely to be preferable to somebody who doesn’t communicate. We’re going to run through a few different options for letters.
A holding letter
A holding letter simply asks your creditors to stop pursuing you for a short time while you get everything in order, and to freeze interest and any other charges on the account. It can give you a chance to get some headspace, seek advice and work out what to do next. Ideally, try to include an indication of when you expect your situation to change and what your next steps will be. It’s important to realise that they are less likely to approve your request if you ask for more than a couple of months.
A debt settlement letter
This means offering to pay a lump sum in return for having the debt closed. For instance, you may offer £1,500 to pay off a £2000 debt. It’s very important to only offer money that you can actually afford to pay, but it’s a good option if you have a chunk of cash available but can’t afford the full amount. Your creditor is under no obligation to accept, and they are only likely to do so if you offer a reasonable amount. They’ll probably expect you to provide a good reason for not being able to afford the full amount, and they may ask for proof. Make sure they formally agree to settling the debt after they receive the money.
You could also suggest a repayment plan. For instance, if you’re missing regular payments of £150 but could afford to pay £75 instead, your creditor may agree to freeze interest as long as you pay on time every month.
A letter to write off the debt
If there’s really no way that you can raise any money to offer your creditors, then you could consider writing to ask them to write off the debt entirely. This is tricky, because there is very little incentive for your creditor to agree. However, if you’re able to prove that you are completely unable to repay the money whilst still maintaining an acceptable basic standard of living and that this is unlikely to change for a long time, then they may consider it.
We recommend you include a budget plan with your letter, as this will show your creditor what little if any money you have left at the end of the month. National Debt Line have a great tool to help you fill in your budget plan. They also have a comprehensive list of sample letters you can use to contact your creditors with.