Dealing with Loan, Credit Card and Overdraft Debt

The best thing to do if you miss a repayment is to make contact with your provider as soon as possible. If you need to make a payment to cover the one you’ve missed, your provider will tell you how to do this. If you think you may be unable to meet future repayments, let your provider know this.

Your provider will work with you to understand your financial circumstances and to agree how best to manage any repayment arrangements you may have.

You don’t need to prepare a budget, but you might find it helpful to have one in advance of talking to your provider. Once you’ve contacted your provider, you will be asked for information about your finances. This information includes any income and expenses you may have, to allow your provider to understand your financial circumstances and to be able to devise an alternative repayment arrangement.

To prepare a household budget, you need to calculate your income to include wages, benefits or other income; your costs to include a) mortgage or loan repayments you may have and b) the essential weekly or monthly costs you usually have (such as groceries, childcare costs, mobile phone costs, TV and broadband costs, costs associated with running a car, health insurance etc.).

All of this information will go into your budget to help you understand how much money you have to meet your costs and how much you may have left over each week or month to spend on non-essential items. It is important that you ensure you have enough money to pay for essential items.

You should work out what you consider to be essential for you and your household and ensure that is included in your budget. Tools to help you work out your budget are available on the internet. Websites like www.mabs.ie and www.ccpc.ie have useful templates for budgeting. These budgeting tools capture a lot of the possible expenditure items you need to include. The websites also have useful information on how to budget.

There are also a range of mobile phone applications available for download to your phone via Google Play Store or the App Store on your Apple device that can help you track, analyse and manage your finances.

Your provider will work with you to agree an approach to resolving any arrears that are likely to occur or that may already have arisen. This approach may include an arrangement to revise the amount of the repayments to a level that is more affordable to you.

Alternatively, your provider may be able to add some or all of your debt into one loan that is affordable for you to repay on a weekly or monthly basis.

Not making full repayments or missing a repayment on your debt will mean that your credit record will be impacted – providers are required by law to report all outstanding loans to the Central Credit Register (CCR). A poor record on CCR may impact your ability to get approval for credit in the future.

The information that a provider submits to the CCR builds up your credit history over time and is used to create your credit report. The information shown on the credit report that you receive will show up to 5 years of information. In the case of a loan still being repaid, the most recent 2 years of repayments will be shown on the report that the provider receives. For a loan or credit card that is closed or paid off, a provider will see the final 2 years of information. The information on a closed loan will no longer be on the report 5 years after the last repayment was made.

Please note that the information you request or access from the CCR is a credit report – it is not a “credit score”.

More information is available on the CCR website here.

If your circumstances change, including for the better, it is important that you contact your provider and talk through your changed circumstances. For example, improved circumstances may allow you to shorten the number of repayments you will have to make or by increasing the amount you pay each week or month which could reduce the overall cost of your credit.

The full range of options will be discussed with you by your provider.

Debt Relief Notice: you may apply for this through MABS or another approved body. If you have unsecured debts below €35,000, a low income and few assets – this gives you freedom from your debts normally after three years.

Debt Settlement Arrangement: you may apply for this through a Personal Insolvency Practitioner (PIP) – your outstanding unsecured debts are written off over a period of time, normally up to 5 years.

Personal Insolvency Arrangement: you may apply for this through a Personal Insolvency Practitioner (PIP). This allows you to settle and/ or restructure your secured and unsecured debts over a period of time, normally up to 6 years. (A mortgage is a typical example of a secured debt.)

Bankruptcy: you may apply to the High Court to be declared bankrupt.

Visit www.backontrack.ie for further information.