(in parts of this entry that refer to a previous post please refer to the first post of this blog http://ausdebtsolutions.blogspot.com/)

If you are struggling with debt and have looked on the internet for help you may have come across Debt Agreements, Bankruptcy and other debt consolidation methods. Many people feel that theses are their only options however one avenue you may which to explore is that of an informal payment plan or debt management as it is commonly known as. It may be wise reading the first on this Blog ‘Income and Expenditure’ as it will help you greatly should you decide to pursue this option.

Firstly here are a few pertinent points to remember about informal payment plans:

1, Your creditors are under no obligation to accept your offers or indeed freeze interest on your accounts.

2, Before you get arrangements in place you balances may actual increase in the short term.

3, You are not protected legally and may face further action by your creditors if you do not make your monthly contractual payments.

4, Your credit score will be harmed by making reduced payments.

5, You have maintain full payments to secured debts such as car hire purchases, secured loans and mortgages.

The above points are very much worse case scenario situations and with determination informal payment plans may act as a could buffer before you decide what course of action to follow next. Although there are no ‘official’ criteria as to what circumstances should constitute considering an informal payment plan it may be wise to consider the following points:

1, How long are you going to be paying your debts?

If having worked out your income and expenditure (see first post) and you only have $200 a month to offer your creditors and you owe $40,000 you are best case scenario going to be paying your debts for 16 years. Clearly, this is a ridiculous amount of time to be under such financial constraints and you are properly better off seeking alterative solutions. If however, you are able to afford more then amount of time you are repaying your debts maybe a lot shorter in timescale. In short. Be realistic with yourself. Some sites sell debt solutions products under the guise of saying that by avoiding bankruptcy you are doing the ‘honourable’ thing. Generally speaking, only you know debt is effecting your life and perhaps by doing an informal payment plan you could see for yourself what debt consolidation is like in practical terms before committing to something more formal such as bankruptcy or a Debt Agreement.

2, Are you strong enough to say ‘no’.

If you pay less to your creditors they are naturally going to hassle you for more. In order for an informal payment plan to work you must learn to say ‘no’. Make your offers and then your payments. If a creditor asks for another $10 and they will freeze interest and charges then it may be worth considering. However, if you begin paying one and not the other you are going to make things worse. If you have sent your income and expenditure one tactic maybe to ask them where they can see you getting the extra money from and negotiate from there.

3, Do not use anymore credit.

This may seem academic but if you are still spending on cards your creditors are not going to accept any reduced offers.

4, What can you give up?

Debt should not mean you put your life on hold but could that $100 a month gym membership that you go to once a fortnight be better spent on paying your debts. You have to see it from your creditors perspective. Imagine if you were owed money and someone said they wanted $80 for the top end cable package? You would at least expect them to downgrade to something cheaper and perhaps you could do the same?

5, Is there anyway you could offer settlements?

I will be covering this topic in next weeks post. However, you may have some savings which could be used to offer one off settlements?

6, Expect thing to get worse before they get any better!

If you have been maintaining regular payments to your creditors they are naturally going to be surprised to see that you are suddenly offering them less each month. They will add penalty fees and your balances will increase before they start going down. The first six months are often the worst and can be the cause of a lot of stress and worry. Try to remain positive and if you feel inclined post here for more help and support.

Think about the above if you are considering an informal payment plan. In the next few weeks I will be writing another post about one of the most important aspects of Debt Consolidation which is how to cope when you are consolidating your debts. You can find more information at our site www.ausdebtsolutions.net or feel free to leave a post and I will answer it as soon as possible.