How to reduce your monthly debt payments
What amount would be acceptable as a token payment to my creditor?
You’ve read our Token Payment article, and you’re feeling calmer. You now know things are not as bad as you first thought. Now, you’re ready to start making token payments, but wait… What amount would be acceptable as a token payment? You ask yourself.
That is a good question, but the wrong question. The Real Debt Guy is here to show why…
Let’s go...
The FCA Handbook
Section 7.3.4 of the FCA Handbook, which can be found here, states, under Forbearance and due consideration, that:
A firm must treat customers in default or in arrears difficulties with forbearance and due consideration.
The Financial Conduct Authority
What does this mean to you? To answer that, we first need to head to Section 7.3.5.
Examples of treating a customer with forbearance would include the firm doing one or more of the following, as may be relevant in the circumstances:
(3) accepting token payments for a reasonable period of time in order to allow a customer to recover from an unexpected income shock, from a customer who demonstrates that meeting the customer's existing debts would mean not being able to meet the customer’s priority debts or other essential living expenses (such as in relation to a mortgage, rent, council tax, food bills and utility bills).
The Financial Conduct Authority
So, the Financial Conduct Authority's rule instructs the creditor to use “Forbearance,” and the guidance shows how the creditor can do this.
Putting this guidance into simple English, whatever is left after your essential living expenses and priority debts are paid is the amount you should pay your creditors. If you have any priority debt arrears, the creditor should expect payments from you once these are cleared.
The correct question
So, the question you should be asking is:
“What can I afford to pay to my creditors?”
As usual, we have you covered. You can easily find this out using The Real Debt Guy budget planner. Once you’ve input your figures, it will tell you what you can afford.
We got you!
The Real Debt Guy is a qualified financial adviser and a UK debt expert. The information in this article is considered to be true and correct at the publication date.
