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Freezing the interest on your debts can help you cope. See if one of our 3 tips can help you.
If you’ve got debt that’s become unmanageable, the last thing you need is for your lenders to add on a load of interest or extra charges. That’ll make it even more difficult to get back on an even keel with your finances, because whilst the payments you make each month reduce the balance, the interest and any charges add to it again!
This is clearly not a good situation, so what can you do about it? Well, you can try to get the addition of interest every month stopped or reduced, at least for a short while anyway. There are three ways you can go about doing this and, if you’re successful, it’ll free up more money for you to spend on the essentials you need to live your everyday life, which should make it a little easier to cope.
In part one of this two part blog, we’ll look at getting lenders to freeze interest on your debts. In part two, we’ll look into whether a debt solution is the best way to forward or if maybe a 0% interest credit card might be a better option. Let’s get started.
Ask lenders to freeze interest
The first, and easiest, way forward is to call and explain your situation to your lenders. If you tell them that adding interest will make it impossible for you to maintain payments, they may be willing to give you a temporary freeze. The Lending Code could help you here. It's a voluntary 'code of practice' that's followed by lenders and other financial companies. Any company that follows it 'is committed to acting sympathetically and positively if you are experiencing financial difficulties'.
You are also protected under the FCA regulations relating to dealing with customers in arrears. The regulations state that “a firm must treat customers in default or in arrears difficulties with forbearance and due consideration”. And an example of what they consider to be forbearance is suspending, reducing or freezing interest charges.
That can mean a lot of things – but one thing they'll look at is 'reducing or suspending interest and charges if these would cause the debt to increase or lead to the repayment term becoming too extended'. So, if you're struggling, get in touch and tell them. You'll have to show them that you're offering to pay as much as you can afford – you could offer to complete a budgeting form. And, point out that freezing interest on your debt would really help you repay what you owe. If they agree, even if it’s only for 30 days, it’ll at least give you time to get some debt advice and put a payment plan together.
If you do this, we’d advise that you make sure you:
• tell them if other lenders have agreed to freeze interest on what you owe them.
• get agreements in writing, in case you need it later on.
• make all your agreed payments. If a lender agrees to accept smaller payments and/or freeze interest, they might well change their mind if you don't stick to your new agreement.
That’s all for now. In part two, we’ll look at two more ways of getting the interest frozen on your debts.
by Shelley BowersBack to blog home