Debt

Debt

The cost of living is pushing more of us into debt. Avoiding it is best but once we’re in debt, what can we do?

Do

  • Write out a budget plan every few months or when anything that affects your cash changes like changing jobs, having kids or coming into a bit of money. See our Budgeting page
  • We should find help as soon as we realise we can’t make ends meet. Go to a charity or not-for-profit advice centre. Private companies often charge us for helping, which defeats the purpose, and it will take longer to get back on top.
  • If we have debts, but a bit of money left over each week, we should pay off as much as we can afford without over-committing ourselves. Be realistic. If we commit to payment levels and can’t keep up with them, we will struggle to reach a new deal with lenders.
  • Understand how interest works. It’s the charge placed on top of what we borrow. As it’s a percentage, the more we borrow, the more it costs us. And, of course, the higher the percentage, the more that costs us too.
  • Pay off debts with high interest first. If we can, we should find credit (also know as debt) with cheaper interest and move our debt around, working towards paying it off. It can take a while but this is all about taking control.

Don’t

  • Never borrow money from an unlicensed lender, even if it’s someone we know. They offer ready cash and there’s no paperwork, but that means they can ask us to pay whatever they like in future. They are loan sharks (more here). If you get caught in this trap, contact the Illegal Money Lending Team on 0300 555 2222.
  • We mustn’t stick our head in the sand. Face up to debt, however small, and take action. There is free help available and if we owe too much to even make the minimum payments each month, we need to find help fast. People find they start to feel better with someone on their side who may be able to speak to lenders and even handle their payments for them.
  • Don’t be scared to pick up the phone. We should do this as soon as we know we’re struggling. Creditors (who we owe money to) want to get their money back, however long it takes, and it’s in their interests to strike a deal.
  • We should never borrow for anything we don’t absolutely need unless we are completely sure we can repay it, on time and preferably before the lender whacks interest on top.

Breathing Space

The government’s Debt Respite Scheme – known as ‘Breathing Space’ – is available to people in England and Wales who are struggling with problem debt. The scheme provides legal protections so that we cannot be contacted by companies we owe money to, for a certain length of time. In this time we should seek debt advice. It’s also available to people receiving mental health treatment.

To apply for Breathing Space, contact the local Citizens Advice office, a national debt charity like StepChange or National Debtliine, or the local authority (see the list below for contact details).

You can read our Readers Club article here for more details about the scheme.

National Debtline
0808 808 4000 Freephone
www.nationaldebtline.co.uk
Also offers the online advice service My Money Steps.

StepChange Debt Charity (CCCS)
0800 138 1111 Freephone
www.stepchange.org
Debt advice charity offering free debt management plans.

Civil Legal Advice (CLA)
0845 345 4 345
www.gov.uk/civil-legal-advice

Debt Agencies
There are a number of debt advice agencies that operate in your area. To find your nearest advice centre or to get free advice call 0800 138 1111.

Citizens Advice
Find your local bureau at www.citizensadvice.org.uk