Guide to dealing with debt
Millions of people are facing financial difficulties for the first time due to the Coronavirus pandemic
Millions of people are facing financial difficulties for the first time due to the Coronavirus pandemic, with many wondering where to turn for help. The Government last week announced an additional £38 million funding through the Money and Pensions Service for the debt advice sector. The aim is that this will ensure one million people receive full debt advice and two million people debt guidance over the next 12-18 months to help them get back on their feet.
Phil Andrew, chief executive at debt charity StepChange said: “It’s worth remembering that nearly 10 million households faced financial stress even before the pandemic, and our new research suggests that 4.6 million people are already facing financial problems as a direct result of it.”
Here’s our guide to dealing with debt and where to go for advice.
1. Get to grips with how much you owe
If you feel like your debts are starting to spiral out of control, start by writing a list of everything you owe. You should also record how much you have coming in each month, and your outgoings. See if there are any costs you might be able to reduce each month, for example are there any regular subscriptions you could cancel? If there are, you could use these savings to pay down your debts.
2. Prioritise your debts
Work out which of your debts take priority. These should be anything which might affect the roof over your head, such as your mortgage and council tax payments, followed by any unsecured debts, such as credit cards and personal loans.
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3. See if you can reduce your interest charges
Look at ways you might be able to reduce the amount of interest you’re paying on your debts. For example, might you be able to remortgage to a more competitive mortgage deal, or could you move your credit card balance across to a card offering 0% on balance transfers? Several balance transfer cards, including those offered by TSB and MBNA offer 0% introductory periods for longer than two years, enabling you to pay back what you owe without having interest on top. Bear in mind that there will usually be a balance transfer fee to pay when you switch your balance over, so make sure you factor this in.
4. Talk to your creditors
If you’re finding it impossible to pay back what you owe, get in touch with your creditors as soon as possible. Mortgage lenders, credit card and loan providers are all offering temporary payment holidays to those whose finances have been affected by Coronavirus, which might help alleviate some of the financial pressure you’re under. Remember though that your payments are only being deferred and not written off, so interest will continue to mount up on your debts. If you’d rather not take a payment break, there might be other options available to you. For example, you may be able to arrange to make smaller repayments over a longer period of time, so contact your lender and see how they might be able to help.
5. Seek specialist debt advice
There are several free services offering debt advice and support. For example, the Money Advice Service, the Debt Advice Foundation, StepChange, and National Debtline all offer free debt advice and may be able to help you work out an affordable repayment plan with your creditors.