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How are my debt repayments worked out?

We put together your household budget, looking at how much you need to spend each month on living costs, as well as your contractual payment figures. We then work out how much is left over after this each month.

This is called your ‘surplus’. Knowing what your surplus is helps us work out whether you need a debt solution, which one is best for you and how much you can afford to pay your creditors.

If your surplus is very low and your financial situation is going to improve within the next 12 months, we may recommend you make token payments of £1 each month to all of your creditors.

How we work out what each creditor gets

We work out how much to pay each of your creditors based on the contractual payment you originally had arranged with them and how long it will take to repay each debt. We work out the payments this way because:

  • We can be sure none of your creditors are treated better or differently to another
  • We can repay debts with shorter repayment terms more quickly, so a debt with a 5 year term will be repaid before a debt with a 10 year term
  • Your creditors will be repaid one by one so you’ll see the progress you’re making and your debt total reducing.

Repayments to different types of debts

We calculate your payment based on 5% of your balance. This is an estimate of the amount you need to pay to cover your minimum payment plus extra to pay the debt off in a reasonable time.

For example, if you owe £3,500 on your store card we’ll put your contractual payment as £175.

The minimum payment on your store card, catalogue or overdraft might be different to this but we use 5% to make sure that all your catalogues, store cards and overdrafts are treated in the same way.

We use 5% as this is the average amount for contractual payments on overdrafts, store cards and catalogues across the industry. 

The contractual payment for these debts is 3% of your balance. This is an estimate of the amount you'd need to pay to cover your minimum payment plus extra to pay the debt off in a reasonable time.

For example, if you owe £6,250 on your credit card we’ll record your contractual payment as £188 (3% would be £187.50 but we round up to the nearest pound).

Your minimum payments might be lower than this but by using this 3% we know that all of your credit cards are being treated the same.

We use 3% as this is the average amount for contractual payments on credit cards across the industry. 

If you’ve got a payday loan the contractual payment will be the same as your outstanding balance.

For example if your payday loan balance is £450, your contractual payment will be £450.

This doesn’t mean that your payday loan will be treated as a priority; it just means we get an accurate picture of your situation and whether you can afford the payments you’re being asked for. 

The payment your payday loan receives will be based on 5% of the balance so they aren't treated any differently than your other creditors.

If you’ve got a personal loan or any other type of unsecured debt your contractual payment will be the amount you agreed to pay back each month.

For example, if you took a loan out for £10,000 and you agreed to pay back £200 a month when you took the loan out your contractual payment will be £200.

If your contractual payment varies we'll use an average of the different payments you've been asked to make.