Informal Debt Agreements

An Informal Agreement is the process of restructuring financial terms of current debts.  Its working with creditors to establish new affordable repayments. Benefits may include:

  • Lower your interest rate
  • Lower monthly repayments
  • Save your credit rating
  • Avoiding default

Negotiate With Creditors

Restructure repayments to a plan that is affordable to you and acceptable to creditors

Is An Informal Agreement Safe?

It is a professional agreement between you and creditors

Financial Control

Stop collection calls – freeze/reduce interest – Stop late fees, penalties and charges

How it works

What exactly is Informal Debt Agreement?

An informal agreement is the negotiation and restructuring of debt for those dealing with financial hardship. It’s the process of reaching out to creditors and adjusting original terms to the benefit of both parties.

It allows borrowers a channel to manage debt without falling further behind and potentially going bankrupt. Informal Debt Agreements are a option to proactively tackle debt before debts spiral our of control and creditors take action.


What are the benefits?

An Informal Agreement offers numerous benefits for those struggling with debt, below are key features:

  • Freeze or greatly reduce interest repayments
  • Stop late fees, penalties and other charges
  • Potentially reduce the total amount of debt owed
  • Potentially get a repayment waiver period (for a certain time frame)
  • Stop any collection calls
  • Protect your credit rating
  • Create a new affordable monthly repayment plan

What are the drawbacks?

Whilst a Informal Debt Agreement has benefits, there are restrictions to the agreement:

  • Creditors may reject your proposal or choose not to negotiate
  • Repayments may have to be adjusted or re-negotiated over time
  • As the agreement isn’t legally binding, creditors can change the terms at anytime
  • If you fall behind, creditors can void the agreement and take further legal action

General Considerations

Debts that can be included

With a informal agreement, most debts can be negotiated – examples include:

  • Credit Cards
  • Store Cards
  • Payday Loans
  • Personal Loans
  • Medical Fees
  • Outstanding Bills (utility, phone, etc)
  • Car Loan
  • Mortgage (hardship variation)

Outcomes can vary depending on the type of debt being restructured.

Do I qualify?

The main consideration is to clearly outline/prove financial hardship, examples may include:

  • Unexpected injury or illness impacting income
  • Serious change in employment or income
  • Relationship breakdown

Each credit provider or lender will have its own approval process and criteria. The above highlight the basis for negotiation.

Informal Debt Agreement Example

Unsecured Debt & Monthly Repayments


Credit Card #1 $12,000 $300
Credit Card #2 $5,000 $125
Personal Loan $8,000 $188
Store Card $5,000 $137
Payday Loan $1,500 $226
Total Owed $31,500 $976

Updated Payment





A renegotiation of the interest rate to the equivalent of  4% over 4 years would change the monthly repayment of $976 to $721.

A difference of $255 a month or $3,060 a year.

Informal Debt Agreement - FAQ's

People also asked

What are my options if creditors don't accept my agreement?

If creditors are unwilling to accept terms you are responsible for the original contract. There are however other debt relief options you can explore to help with your finances.

Does a informal debt agreement affect my credit score?

The actual creation or acceptance of a informal debt agreement does not impact your credit score. However, if you missed payments, prior to your new agreement creditors may have reported this. Note, prior credit blemishes are not removed by a new agreement.

How much does a informal debt agreement cost?

There are a few ways to tackle a informal debt agreement which will impact the costs.

  1. You can actually do a informal agreement on your own. You simply need to reach out to your creditors and discuss. In many cases you will need to speak to their Hardship department.
  2. You can use the services of a Free Financial Counsellor.
  3. You can use the services of a professional debt relief company. The fees are dependant upon the amount of work that will be needed. When using a paid service, make sure all costs are clearly outlined and your overall financial position is improved. Paid services generally have positive acceptance outcome as they have strong relationships with most creditors.

Whats the difference between a Debt Agreement and a Informal Debt Agreement?

Whilst the two agreements have many similarities there are a few key differences, see below:

  • Debt Agreements are legally binding and a part of the Bankruptcy Act 1966.
  • Debt Agreements have credit implications as they are recorded on a public register (NPII) and can appear on your credit file for up to 5 years. This can make it difficult to qualify for certain types of credit.
  • Certain jobs or professional licences that have credit rating requirements, can be affected by a Debt Agreement.
  • As Informal Debt Agreements aren’t legally binding, creditors can change the terms at anytime.

Informal Debt Agreement companies - Finding a reputable company

There are numerous debt relief companies throughout Australia that provide informal debt agreements. A good place to start is to do an online search for reviews on the service and company. Below are some additional considerations:

  • Check the company is licensed, has a ABN/ACN
  • Review, fees and charges compared to other providers.
  • Check the terms closely making sure there is a genuine benefit to you.
  • Be wary of companies that use scare tactics, rush agreements/contracts, do not provide full disclosure of pros & cons (especially drawbacks)
  • Be mindful of promises made verbally versus in writing.

Informal Debt Agreement DIY templates

Considering contacting creditors on your own? Take advantage of these different templates to help put together professional requests.

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