An Informal Arrangement is the same thing as an Informal Debt Agreement. It happens when you write a letter to a lender and ask to temporarily vary your repayments because you are on difficult financial times. It can include a request for one or more of the following:
- a temporary stoppage of repayments
- temporary lower repayments
- agreeing to a lower lump sum payout
- freezing of interest (unlikely)
This request may become necessary due to lower income because of unemployment, relationship breakdown, illness or accident etc. If it’s a home loan, you might even just need some breathing space while you sell the house because of something which has more permanently reduced your income or increased your expenses.
It can be made in regard to any credit such as credit cards, store accounts, personal loans, car loans or home loans. As the name suggests, it is an informal arrangement between you and the lender and therefore has no legal backing. There is some discussion as to what would happen if the lender agreed to accept your terms but later decided not to honour the agreement. There appears to be little security in the arrangement for the borrower.
Remember also that while you stop or reduce repayments, your total loan balance is very likely rising and even a small rise may take many more months or years of repayments to pay off in the end.
Many lenders have hardship provisions and will consider your application but, in reality, few will approve it. It can become a long drawn out affair of negotiating back and forth for a minimal and temporary result at best.
There is the added problem that once your bank or lender finds out you are in financial difficulty, they could even pressure you or commence proceedings to call in the entire loan or even force the sale of your home.
Having said that, there are many examples where a temporary reduction in repayments have allowed people to get back on their feet and save their home. It can avoid having defaults registered on your credit history which is a good thing.
SOS Debt Solutions can assist you negotiate an informal arrangement if it’s right for you. We have good working relationships with many lenders and are able to assist you in preparing and presenting the best possible proposal. We will then also liaise on your behalf with your lender/s to try and achieve the best outcome. The fact that you are utilising a debt agreement professional like SOS, usually greatly improves your chances of success. Should your proposal be declined you can appeal to the lender’s External Complaints Service but you must approach the lender first.
If you would like to find out more about an informal arrangement contact us on 1800 767 332 or fill out the short contact form and we’ll get it touch with you by the next working day.