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How and where to get help with debt

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Around 15% of UK borrowers are struggling with debt they cannot afford to repay, with almost half trying to cope on their own and four in five choosing not to apply for debt. ‘assistance.

Striking figures from the regulator, the Financial Conduct Authority, released this morning revealed that many of those who had not sought debt advice or help were ‘put off talking to their families due to shame , guilt or embarrassment they felt about being in a financial situation”. difficulty”. Thus, many preferred not to seek this support.

But with inflation at 9.1% in May and the Bank of England admitting it is expected to hit over 11% by October, more and more people are having to rely on debt to meet their costs. of subsistence.

A recent report by the charity Stepchange and Barclays Bank showed that a third of Britons have used buy-it-now, pay-later services, and that one in three are going into debt at cause of problems.

There is also evidence that some households even resort to buy it now and pay later to cover the cost of their weekly groceries.

The energy cap is set to rise by 51% in October, according to forecasts by Cornwall Insight, taking annual bills to nearly £3,000.

And with the latest figures from the Bank of England showing Britons spent an extra £400m on credit cards in April, the figures reveal the true depth of desperation amid the cost of living crisis.

But, feeling ashamed when so many people rely on credit to get by can do untold damage and leave you far worse off than if you were seeking help.

Steps to settle your debt

If you’re worried about money and think you won’t be able to make ends meet, here are some simple, practical steps you can take to get your finances back on track:

Determine the money coming in and going out

Make a list of the amounts you owe and to which suppliers. Look at the interest rate you are charged on each. It could be that remortgaging your home to pay off much more expensive debts such as credit cards and overdrafts would reduce your repayments.

Get help making a plan

Generally, it’s best to make big decisions like this with the help of a debt counselor. There are many charities that offer help for free. It’s confidential and it’s up to you what you choose to do next.

Try to avoid companies posing as debt advice – for a fee. This type of company may appear to offer help and may even leave you in a better financial position than yours by helping you consolidate debt or begin the process of applying for public assistance. However, they will take a cut of the savings you make for their services. You don’t need to pay if you go to a charity or an organization such as Citizens Advice.

Stepchange and Turn2Us as well as the government-backed MoneyHelper all offer free sessions with debt counselors who can help you start making positive changes.

Talk to your bank, lender and credit card provider early

UK banks are under heavy pressure from the government and the financial watchdog to help customers who are struggling to repay debt on time. This means that they will most likely find a way to help you stay in control of repayments by allowing you to repay a lower amount for a set period of time, switching your mortgage from principal repayment to part interest. only to reduce monthly payments – or simply to give you a holiday from payments and a little respite.

All of these options are designed to help you in the short to medium term, so make sure you understand what lower monthly payments will mean for you in the long term.

Pause payments

The government runs a relatively new program called “breathing space” which allows you to suspend payments and add your interest and charges to your account balance without your lender contacting you or appointing debt collectors for a period of time. of 60 days. Not everyone is eligible, but a debt counselor should be able to help you understand if this is an option for you and also how it might affect your finances in the future.

There is a separate scheme for those receiving treatment for acute mental illness, preventing their creditors from contacting them during this period and for a further 30 days thereafter.

If the debt becomes too heavy

There are a number of different approaches if you simply cannot afford to pay off your debts. If you owe less than £30,000 it may be possible to apply for a debt relief order while those who owe more than that could file for bankruptcy.

There is also the option of entering into an Individual Voluntary Agreement (IVA), a legally binding contract with your lenders committing you to repay your debts over a set period of time.

The benefit of this is that during the IVA you won’t be charged more interest and your lender will stop chasing you for money. There are fees to pay and Citizens Advice recommends alternative routes if you owe less than £10,000.

It is possible to include late energy bill payments, late council tax, water bills, payday loans, store cards, catalog financing, overdrafts, personal loans, late tax payments to HMRC and even debts to family and friends. Child support, student loan repayments and court fines are not covered.

If your financial situation changes, for example if you receive an inheritance, you are legally obliged to inform your lenders and you will probably have to use this money to pay off unpaid debts.

Understand the impact

While the most important thing to do when you have debts that have gotten out of hand is to make a realistic plan to pay them off, all of those deals will show up on your credit report.

This will affect your ability to remortgage or secure any other form of credit or loan for several years. Some lenders still offer financing for those who have had debt problems in the past, but you’ll likely have to pay a higher interest rate and may have to wait a few years before you become eligible again.

Where to get help for free

The list below is mainly for England, but there are similar programs in Scotland and Wales:

StepChange Debt Charity : 0800 138 1111

The debt charity’s online counseling tool has helped more than 1.7 million people create a budget and get a personal action plan with practical next steps.

Payment Plan: 0800 280 2816

PayPlan’s online debt solution tool, PlanFinder, can provide you with a personalized debt solution in as little as 15 minutes. It also offers free live chat and email support for immediate help.

National debt line: 0808 808 4000

National Debtline offers free online debt advice through its digital advice tool and web guides, fact sheets and sample letters.

Network of financial advisors

The Money Adviser Network offers free debt advice backed by MoneyHelper. Provide your details confidentially and they will connect you with a qualified and regulated financial advice provider so you can get back on track.

Debt Advice Foundation: 0800 622 61 51

Debt Advice Foundation is a national debt advice and education charity that offers free, confidential support and advice to anyone concerned about debt.

Citizen advice: 0800 144 8848

Citizens Advice offers help and information on almost every aspect of life. It offers online, telephone and face-to-face counseling sessions and has a very comprehensive tool. library of information on the different options available if you are having difficulty.