Starting a debt solution can be a daunting prospect. I know this because I used to be a debt advisor. Many customers commented on how nervous they had been before the call. A common reason for the nerves was a lack of awareness about what the call entailed.
All the calls have three sections that thread through the call. Knowing what these sections are, and preparing for them, helps the call to flow.
The three different sections are as follows: the fact find, your income and outgoings, and the recommendation.
The fact find
This is the part of the call for you to tell your story. It’s important for the advisor to understand your circumstances as it really helps when it comes to recommending the best debt solution for you.
Here is a list of some of the things the advisor will want to know:
- How much you owe
- Who your debts are with
- If you have arrears with priority debts such as your rent or mortgage
- How old you are
- Your type of income and it’s stability
- If you’re a homeowner and your type of mortgage
- If you have any stocks shares of savings
- If you have any children and their age
- Your future plans
Some of the things on this list might worry you. For example, you might be concerned why your home and mortgage is discussed? The answer is because they want to help protect your home. Some debt solutions can legally protect your home from your creditors.
What I’m trying to say is, you should give over an element of trust to the advisor. I understand that might not be easy; after all, you’re speaking to a stranger. Just know that what they are asking is to help you, not hinder.
Income and expenditure
This is the beating heart of the conversation. The advisor will look at what monthly income you have coming into the household, and what your expenses are. The money that is left over (if any) is your monthly disposable income.
That means all your income and expenses will need to be converted into monthly figures. It’s not always straight forward to do this, especially when put on the spot during a call. That’s why it’s always a good idea to prepare this part before the call.
If numbers and figures aren’t your thing though, don’t worry - the advisor will help you here. You can also take a look at our financial reviews guide for help.
Alongside our guide, you can use this great tool created by the Money Advice Service. It helps you to accurately convert everything into monthly amount, and might remind you of things you could forget to include.
If you don’t want to use this tool, remember not to include your unsecured debts in your outgoings These will be included in your debt solution. Unsecured debts are things like overdrafts, credit cards, and personal loans.
The conversation about your income and expenditure should flow something like this.
- Your income
- Fixed expenditure (rent, utility bills etc)
- Non fixed expenditure (clothing, food etc)
Again see our financial review guide to help you here.
The final part of this section will be to agree your disposable income. Your disposable income is a good indication of how much your payments will be if you start a debt solution, so it’s important it’s accurate.
If you’ve correctly prepared your income and outgoings before the call, there should be no surprises here. Either way, if the disposable income doesn’t seem correct, it’s not a problem. You can always go back over your figures with the debt advisor.
It’s possible you have missed something from your expenses, but more often than not you’ve probably underestimated how much you spend on something from your non-fixed outgoings.
This process of trying to the correct disposable amount can be frustrating. Even though the debt advisor will try and help you as best they can, they can’t tell you where you spend your money. Try to stay patient. Find the correct disposable income is crucial to the long term success of a debt solution.
Your hard work is now over. It’s now over to the debt advisor. They will look over all the details they’ve taken from you.
The debt advisor will recommend one of the following to you:
- General budgeting advice
When giving their recommendation, the advisor will explain why they are ruling out the other options and why the debt solution they are advising is the best option for you.
If you’re unsure about anything, ask! This is an important decision. You can always go away and think about your options before making a decision.
A note on general budgeting advice
Budgeting advice is what it sounds like. This may be the first time you’ve sat down and had a thorough look at what you’re spending. It may be that just by cutting back in an area means you don’t actually need a debt solution.
The advisor will go over the areas you could cut back in. Whether it’s food, mobile phone bills, or hobbies, take this as an opportunity to put your household’s finances in order.
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