Can I Get My Creditors to Freeze Interest on My Debt?
QUESTION
I am
currently in the process of negotiating with my creditors, in an
attempt to resolve a financial "sticky patch" I am currently in.
Some of my creditors have agreed to freeze the interest on the
outstanding amounts, but others have not.
The ones that agreed to do so, I just asked them to. Is the normal
policy when attempting to get interest charges frozen, just to ask,
or is there some standard format in having interest frozen.
Reply
First, creditors do not have to freeze interest. A bank will have an
overdraft rate of interest (and a horrendous unauthorized overdraft
rate), a money lender will have protection under the Consumer Credit
Act to charge default interest, and businesses can charge 'late
payment interest' after 30 days from invoice date.
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Our advisors will be happy to
give you free debt advice about how you can manage your
debts
The interest that continues to be charged on debts that
are 'substantially' overdue, old or impossible to pay
off fall under the grey area of what is 'fair and
reasonable'. If you have a £700 debt and monthly
interest of £5.01 and you are paying £5 per month you
will, obviously, not discharge the debt. And more
importantly, as it is the debt will take about 12 years
to clear without further interest being added.
The term of 3 years to settle just about
any consumer debt seems fair and reasonable - unless
your situation changes. Lenders that set up repayment
terms of 20+ years are more numerous than you would
expect. It is fair and reasonable to offer all creditors
a repayment plan that will end on the third anniversary
- again unless the situation changes. I would like to
see the freezing of interest as a mandatory action and
there is some agreement from a number of
lenders/creditors.
Another way of dealing with the interest
is to offer, say, £5 per month until you 'sort things
out', and then recommence paying interest and a larger
monthly payment when you can. But if you do not approach
the lender they cannot refuse in the first instance.
