Token payment letter: when you can only offer £1 a month
If your essential bills take everything, a token payment keeps the account in contact without promising money you do not have.
When is a token payment the right offer?
When an honest budget shows no money left for non-priority creditors after rent or mortgage, council tax, energy and food — for example after a job loss, during illness, or while waiting for benefits. If something is left, however small, the repayment offer letter shares it fairly instead. With several creditors, the Offer Pack shares what you can afford pro rata and writes every offer letter at once.
What happens to the debt during token payments?
The balance is still owed, and your credit file will usually show the account as in arrears or in default. Ask for interest and charges to be frozen in the same letter, or the debt can keep growing. If token payments look likely to last a long time, talk to a free adviser about whether a Debt Relief Order or another solution would deal with the debt instead.
The letter
The Letter Builder fills in this letter with your details and downloads it as Word or PDF — free, and the letter never leaves your device.
Your name Your address [Date] [Creditor name and address] Account/reference: [account number] Dear Sir or Madam, I am writing about the above account, which has a balance of £[amount]. I cannot afford the contractual payments. After paying my essential living costs and priority bills I have no money available for my creditors at the moment. I can offer a token payment of £1 a month while my circumstances are like this, and I will review the position with you if they change. I enclose a statement of my income and expenditure, which shows how this is calculated. Please freeze interest and charges on the account while this arrangement is in place, so that my payments reduce the balance. Please confirm in writing that you accept this offer and that no further recovery action will be taken while the payments are made. Yours faithfully, [Your name]
Fill it in and download as Word or PDF
How often should I review a token payment?
Whenever your income or essential costs change, and in any case when the creditor asks — many review token arrangements every few months. Keep your budget up to date so each review takes minutes.
You never have to pay for debt advice. MoneyHelper (government-backed), StepChange, National Debtline and Citizens Advice all give free, confidential advice with no obligation.
Common questions
Do creditors have to accept a token payment?
No, but regulated lenders must treat customers in financial difficulty with forbearance and due consideration, and FCA guidance includes accepting token payments for a reasonable period as an example of that.
Is £1 a month really enough to offer?
It is the usual token amount when nothing is left after essential costs and priority debts. What matters is that the figure matches an honest budget you can show the creditor.
Will token payments stop a default?
Not necessarily. The account may still be defaulted and shown on your credit file, but paying something and staying in contact usually keeps recovery action calmer than paying nothing.