£1 a month debt repayments

Posted in 'Dealing with Debt' by Richard Catlin

31 March 2010

A new initiative that is set to be introduced shortly after Easter could offer real hope to people struggling with debt.

The scheme has been in the pipeline since the outcome was published six months ago of a consultation involving the Ministry of Justice (MoJ), the Department of Business Innovation and Skills and the Insolvency Service.

Now, the MoJ, in conjunction with the British Bankers Association (BBA), Consumer Credit Counselling Service (CCCS) and Citizens Advice Bureau has formally agreed a framework that will protect a specific group of struggling borrowers.

The new initiative is specifically aimed at helping debtors with at least two unsecured debts and who have suffered an unexpected change in circumstances (such as redundancy) but who have had, until that change in fortunes, a good repayment history. Consumers who fit this profile will be able to make 'token payments' of just £1 a month for an initial six-month period - after which it is hoped they will be back on their feet and able to resume their normal payment schedule.

In addition, lenders who are signed up to the Lending Code may provide extra help through measures such as freezing interest.

It is estimated that there are in the region of 5,000 consumers who could benefit from the new initiative.At the same time, extra help has been announced for homeowners struggling with repayments, including a relaxation of the eligibility criteria for Income Support Mortgage Interest (ISMI) - an initiative that assists homeowners who receive pension or income benefits.

Even if you’re not eligible for the new initiatives, you can get free, impartial help and advice about dealing with debt by using the Debt Advice Centre on checkmyfile. Whether you are worried that your debts are fast becoming a serious problem, or if you need to sort out your monthly cash flow, you’ll find guidance on the different options available to you.

But the main learning point from the new initiatives is how important it is to have, and to maintain, a good payment history. By subscribing to our Unlimited Access service, you can keep tabs on how your repayments are being recorded, so that if your financial fortunes take an unexpected tumble, you’ll be sure to qualify for the new range of help now being afforded by lenders.

Monitor your credit files now