Where to get help with debt?

Where Can I Get Help With Debt?

Posted on 12th October 2018

There are several ways to get help with debt, but the most important (and most critical) is to seek out professional advice for any debt management problem.

Managing your debt is never pleasant, and debt is one of life’s most stressful experiences.

The sad part is that many of us at one time in our lives have been in debt.

In fact, according to the National Audit Office, up to 8.3 million people are unable to pay off debt or household bills.

Ignoring your debt problems is never a good solution, it will only increase your anxiety and your misery. No debt problem is unsolvable, and although the answer may not be easy or fast, there is always a way out.

The best way to attack a debt problem is head on and the earlier you recognise and deal with your debts, the easier they are to manage.

What type of debt do you have?

For most of us, there are two forms of debt that we encounter when borrowing money: unsecured and secured debt.

Secured debts are those tied to an asset like a house or car. Mortgages are secured debt; if you fail to make the monthly mortgage payments, then the lender will repossess the property.

Unsecured debts, like personal loans and credit cards, typically have higher interest rates but unlike secured debt, if the borrower does not make repayments, then their assets are not taken away.

Although borrowers should note, failure to make repayments will severely damage their credit rating to borrow future credit, plus additional charges are levied against the unpaid debt.

The UK’s biggest debt is…

According to UK Finance, mortgages and credit cards is our most common debt.

In July 2018, UK Finance estimated that British mortgage debt was £24.6 billion whilst credit card debt was £17.1 billion.

Although mortgage debt is on the increase, it is the rise in credit card debt that is most worrying to UK households, increasing 8.1% compared to 2017. Bank overdraft debt has increased, which is not surprising considering how expensive they are with interest and fees.

On the other hand, UK instant access savings account increased to 3.8%, which is encouraging considering that Brits struggle to save.

This savings good news is offset by the increases in high-interest debt and is backed up by the latest Office of National Statistics report states that consumers are borrowing more and saving less, with 30% of household now spending more each month than their income permits.

With the Bank of England base rate so low, and younger people not saving for retirement or spending more to live more exciting and expensive lifestyles; spending now and not saving has caused an increase in UK household debt.

Moreover, it is young people who are feeling the pinch when it comes to out-of-control debt. The debt charity StepChange released a report that stated that over 600,000 people contacted them between January and December 2017 – with most being under the age of 40.

The Bank of England raised interest rates in August 2018, meaning better rates for savers but more interest on debt for borrowers, like those with mortgages and credit cards.

If you have been struggling to make ends meet for a while, or wonder whether this interest rate increase will stretch your monthly budget even further, now is the time to seek debt-management advice.

But, where do you start?

Finding advice for managing my debt

Acknowledging you have a debt problem is the first step to managing it. Before you begin to work out whether you have a debt problem, you’ll need to know about ingoings and outgoings each month.

Make a list of the following:

  1. Income you earn on a monthly and yearly basis
  2. The financial amount of household bills you must pay each month
  3. Contact your lenders and ask them how much you owe
  4. Ask your lender’s what the interest rate you pay on the debt, and the repayments each month are (if you didn’t know this already)

Then ask yourself these two questions:

  1. Are you struggling to pay your minimum outgoings each month? – mortgage/rent, bills, loans, overdrafts and credit card payments?

  1. Are your debts bigger than your annual income?

 If the answer is yes to either or both of the questions then you may have a debt problem.

Getting debt advice can help you with the following:

  • Set a realistic budget each month
  • Plan how to repay your debt
  • Prioritise which debt should be paid first
  • How to communicate with your creditors
  • Where to find additional income (if you qualify) like government debt-support schemes
  • If you cannot repay your debt, seek advice on bankruptcy and Individual Voluntary Arrangements (IVAs)

You can seek help from independent financial advisors however they will charge a fee. The following organisations are charities and will help you for free:

  • Citizens Advice – people can speak to them in person at a branch or on the phone.
  • Money Advice Service – is a government-backed service that can be contacted by telephone and has budget calculators.
  • StepChange – Debt charity that can provide free advice and a free debt management plan.
  • Age UK – for senior citizens, can provide debt advice.
  • Shelter – a housing charity that provides advice online, on the telephone or in person
  • National debtline – offers free guidance and budget planners

All of the above organisations are adept at helping people with debt manage their finances better with online tools and advisors who will analyse monthly financial budgets.

Furthermore, the advice is free, confidential and independent.

5 tips on debt management

As a responsible lender, there have been at times when our customers have run into financial difficulty. Thus, our advice has always been to ensure we support our customers and typically offer the following advice:

1. Don’t try to ignore your debt

There is little point in not making your monthly payments and letting your credit score take a nosedive. Collate your bank statements and open those monthly bills you have been ignoring. Then, make a list of how much you owe and begin repaying the most expensive debt.

The tip here is to make as much effort into paying off your most expensive debt first whilst making minimum payments of the others. Then, when this debt is repaid – start repaying the next most expensive debt and so on until you have cleared them all.

2. Budget better

This has two benefits – first, calculating out how much you can afford each month to make repayments and reduce your debt; and two, a brilliant opportunity to assess your spending habits and determine whether you can cut back on luxuries you could do without like eating out or expensive holidays.

3. Switch as much as your debt as you can to 0%

If you have loan or credit card debt, there are many credit cards that you can transfer balances to with either a 0% or lower interest rate. Although the team here never condone adding new debt to your monthly budget, moving your balances will reduce the interest charged and hence your minimum monthly repayments.

Borrowers can then prioritise and pay more towards repaying the most expensive debt. There is a caveat though – new credit applications require an impeccable credit history so those with an adverse or no credit history may find this option not possible.

4. Switch overdraft options

If you have an overdraft attached to your current account, this is now more expensive than you previously thought. Rather than keep dipping into this overdraft each month – try and switch the overdraft to another provider with a lower interest rate and that pays a cash back fee for switching your current accounts.

Make sure you use this fee to pay off the balance as overdrafts are notoriously expensive!

Once again, borrowers will need a good credit history to apply.

5. Seek advice

Either after you have tried the above five tips or even during it, seek professional, confidential, independent and free consultation from one of the debt charities and organisations listed above.

If you are struggling to meet your financial commitments, it is also worth approaching your creditors to explain the situation and suggest a more feasible repayment plan, as we do here at Peachy.

Bonus tip – consider a debt consolidation loan

There are times when taking out a debt consolidation loan can be an effective strategy for debt management.

Making just one monthly payment, on one date a month that you know will not rise with interest rates can be a more relaxed and effective way to clear your debts.

However, never borrow more money than you need as this will only increase your debt and ability to repay, and always search around for the best rates so that you do not pay too much in interest.

**A debt consolidation loan should only be used as a last resort if no other options are suitable.**

Conclusion

There is always a solution to debt management.

Its substance will vary depending on each person or families household circumstances. The critical point to take away here is never ignore your debt; it will not go away and ignoring it will only make the situation worse.

Whether you believe you are sinking into debt or feel you are already there, there are plenty of organisations willing to give you help with your debt.

Once you have gotten on top of your debt, it’s vital to take steps to ensure you don’t end up in the same position again.

Once repaid, set aside a little each month into a savings accounts so that you have an emergency fund to fall back on should something unexpected happen in the future. As with all life’s little emergencies, you never know when this will occur.

Author: Katre Kaarenperk-vanatoa

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