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Start the Conversation Before the Missed Payments Pile Up

Most people contact a creditor only after they have missed a payment or two, once the reminder letters have started arriving. It is far easier to negotiate from a position of strength before that happens. A creditor would much rather agree an affordable plan with someone who rings them a week before the due date than chase arrears for six months and eventually sell the debt on to a collection agency.

So if you can already see that next month's payment will not fit your budget, make that call now. You are not asking for a favour. Under the rules set by the financial regulator, lenders are expected to treat customers in financial difficulty fairly and to consider options such as reduced payments or a payment holiday. Contacting them early also shows willing, which makes a real difference to how the conversation goes.

Work Out What You Can Genuinely Afford

Before you pick up the phone, sit down with your bank statements for the last three months and build a realistic household budget. List every bit of income, then every essential outgoing: rent or mortgage, council tax, gas and electricity, water, food, travel to work, insurance, childcare, phone and broadband. What is left is your spare income — and it is usually less than people think.

It helps to separate your debts into two groups:

• Priority debts — rent or mortgage arrears, council tax, energy and water bills, court fines and any debt where non-payment could lead to losing your home or your liberty. These must be covered first.
• Non-priority debts — credit cards, personal loans, overdrafts, store cards and buy now, pay later balances. These matter, but the consequences of falling behind are less severe.

Then divide whatever spare income remains between your non-priority debts, offering each creditor a fair share. If spare income is barely anything, a token payment of £1 a month is a legitimate offer and keeps the account in an agreed arrangement rather than tipping into default. Crucially, do not promise more than you can maintain. A plan that collapses in three months leaves you worse off than one set at a lower, sustainable level.

What to Say When You Call

Have your account number, your budget figures and a clear proposal in front of you. A short, honest explanation works far better than a long one. Something like: "My hours were cut in April and my income has dropped by £300 a month. I can afford £45 a month towards this account, starting on the 1st of next month. Can we set that up?"

Be ready for a few standard questions: what caused the change in circumstances, what your income and essential outgoings are, and whether the situation is likely to improve. Answer honestly and keep a note of the date, the name of the person you spoke to and anything they agreed. If you would rather not call, most creditors accept the same conversation by webchat, secure message or letter.

Ask for Interest and Charges to Be Frozen

A reduced payment only helps if the debt itself stops growing. Once a plan is agreed, ask specifically whether interest, late payment fees and default charges will be paused while you stick to the arrangement. Many lenders will do this for a genuine hardship case, but they rarely offer unless asked.

It is also worth asking them to confirm three things in writing, by email or letter:

• The agreed monthly amount and the date each payment is due.
• How long the arrangement will run before it is reviewed.
• What will be recorded on your credit file.

On that last point, be aware that an arrangement to pay a reduced amount is usually reported to credit reference agencies and will affect your credit score for a period. It is still a better outcome than an unpaid default or a county court judgment, and any damage fades as the arrangement is kept up and the debt is cleared.

Keep the Plan Going, and Review It

Set up a standing order for the agreed date so nothing depends on memory, and check your statements to make sure the correct amount is being applied. If your circumstances change — a bill rises, your hours increase, or an unexpected cost lands — tell the creditor straight away rather than letting the plan fail quietly. Most are willing to adjust an arrangement, particularly if you have a history of sticking to it.

Where there are several creditors, you can ask each to review the plan every six months or so, or whenever your income changes. Fresh budget figures are usually enough to reset the amounts.

If a Creditor Refuses, or the Debt Feels Unmanageable

Not every creditor says yes first time. If you are turned down, ask to speak to the vulnerable customer or financial difficulty team, put your offer in writing with a copy of your budget, and mention that you are seeking advice. If you live in England or Wales, Breathing Space can legally pause interest and enforcement action for up to 60 days while you get help — you can be referred by a debt adviser.

And if the numbers simply do not add up, please talk to a free, impartial debt advice service. They will not judge you, they deal with these situations every day, and they can negotiate on your behalf. Reaching out early, with a realistic figure you can actually afford, is the single most effective thing you can do.