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Coping with late payments

As more people in the UK struggle to keep up with monthly payments on credit cards and loans, lenders are trying harder to recover what they are owed. This page should help you to understand what will happen if your payments are late and what to do if you're being chased for money.

What to expect

Debt collection departments and organisations are becoming more advanced and efficient than in the past. Each lender knows that they may be competing with other lenders who also want to be paid off first each month. They use a wide variety of techniques and strategies to make this happen.

For payments up to thirty days late, you can expect a series of reminder letters and phone calls. If these are not successful, letters and calls will become more demanding in tone and eventually you may see lenders suggesting blacklisting, bankruptcy or other legal action.

Your bank or loan company will try to recover debts for a certain amount of time, but will often then transfer the debts to an external organisation that specialises in debt collection. Organisations of this kind are rewarded for collecting as much of the debt back as soon as possible. It means that the pressure applied to you can increase greatly at this stage.

What to do

There is no single right answer for what to do when payments are falling behind but some important tips are shown below. Above all, you need to act as soon as possible. If you have any questions about your own situation, ClearStart can give you free and confidential advice.

• Try to act while debt is still with the original lender – renegotiating payments will be easier
• Understand your financial position better by listing debts and payments, income after tax and basic living costs (see the budget check page)
• Ask for what is reasonable. Lenders prefer to be flexible if it keeps things on track
• See if the lender will agree a longer pay back time – be honest and show what you can afford
• Try reducing your monthly expenditure, leaving you more for debt repayments (keeping lenders happy will avoid legal action and protect your credit history)
• Explore a consolidation loan with a lower monthly payment. You can ask ClearStart for advice first.

It can often be difficult to reach a settlement directly with your creditors or to refinance debts. If this is the case, then it is time to look for external advice. Options open to you with the right external support include an IVA or a Debt Management Plan.