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How and where to get help with debt

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Written by: Sarah Davidson
06/07/2022
Around 15% of UK borrowers are struggling with debts they cannot afford to repay, with nearly half of those trying to cope alone and four out of five of those opting not to seek help.

Stark figures from the regulator, the Financial Conduct Authority published this morning revealed that many of those who didn’t seek debt advice or help were “put off from speaking to their families due to the shame, guilt or embarrassment they felt at being in financial difficulty”. As such, many preferred not to seek this support.

But with inflation running at 9.1% in May and the Bank of England admitting it looks set to rise to more than 11% by October, more and more people are having to rely on debt to meet their living costs.

A recent report from debt charity Stepchange and Barclays Bank showed a third of Brits have used buy now, pay later services, with one in three of those getting into problem debt as a result.

There is also evidence that some households are even resorting to buy now, pay later to meet the cost of their weekly grocery shop.

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

And with the latest Bank of England figures showing that Brits spent an additional £400m on credit cards in April, the figures are unravelling the true depth of despair amid the cost-of-living crisis.

But, feeling shame when so many are relying on credit to get by can cause untold damage and leave you in a much worse place than if you seek help.

Steps to tackle your debt

If you are concerned about money and feel you won’t be able to make ends meet, here are some simple and practical things you can do to get your finances back on track:

Work out what money you have coming in and going out

Make a list of the amounts you owe and to which providers. Look at the rate of interest you’re being charged on each. It could be that remortgaging your home to pay off much more costly debts such as credit cards and overdrafts would bring your repayments down.

Get help to make a plan

Generally, making big decisions like this is better done with the help of a debt adviser. There are lots of charities that offer help for free. It’s confidential and up to you what you choose to do afterwards.

Try to avoid firms marketing themselves as debt advice – for a fee. This type of company may sound like they’re offering help and may even leave you in a better financial position than you are by helping you to consolidate debts or start the process of applying for official aid. However, they will take a slice of the savings you make for their services. You don’t need to pay if you go to a charity or organisation such as Citizens Advice.

Stepchange and Turn2Us as well as the government-backed MoneyHelper all offer free sessions with debt advisers who can help you begin to make positive changes.

Talk to your bank, lender and credit card provider early

UK banks are under a lot of pressure from the government and financial watchdog to help customers who are struggling to repay their debt on time. This means it’s highly likely they will find a way to help you stay in control of repayments by allowing you to pay back a lower amount for a fixed period, by switching your mortgage from capital repayment to part interest-only to bring down monthly payments – or simply to give you a payment holiday and some breathing space.

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

Put payments on pause

The government operates a relatively new scheme called “breathing space” which allows you to pause payments and add your interest and charges to your account balance without your lender contacting you or appointing debt collectors for a period of 60 days. Not everyone is eligible but a debt adviser 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, barring their creditors from contacting them during this time and for a further 30 days afterwards.

If debt becomes too much

There are a number of different approaches if you just cannot afford to repay your debts. If you owe under £30,000 it may be possible to apply for a Debt Relief Order while those owing more than this could file for bankruptcy.

There is also the option to enter an individual voluntary agreement (IVA), a legally binding contract with your lenders committing you to repay your debts over a specified timeframe.

The advantage 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’s possible to include late energy bill payments, late council tax, water bills, payday loans, store cards, catalogue finance, overdrafts, personal loans, late tax payments to HMRC and even debts to family and friends. Child maintenance, student loan repayments and court fines aren’t covered.

If your financial circumstances change, for instance you receive an inheritance, you’re legally obliged to notify your lenders and you will likely have to use that money to repay outstanding debts.

Understand the impact

While the most important thing to do when you have debts that have become out of control is to make a realistic plan to repay them, all of these agreements will be visible on your credit record.

This will affect your ability to remortgage or secure any other form of credit or loan for several years. Some lenders do still offer finance to those who have struggled with debt in the past but you are likely to be charged a higher interest rate and may have to wait a few years before you become eligible again.

Where to get help for free

The below list is primarily for England, but there are similar schemes that run in Scotland and Wales:

StepChange Debt Charity : 0800 138 1111

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

PayPlan: 0800 280 2816

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

National Debtline: 0808 808 4000

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

Money Adviser Network

The Money Adviser Network offers free debt advice backed by MoneyHelper. Provide your contact details in confidence and they will connect you with a qualified and regulated money 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 offering free, confidential support and advice to anyone worried about debt.

Citizens Advice: 0800 144 8848

Citizens Advice offers help and information across almost every aspect of life. It provides online, phone and face-to-face advice sessions and it has a really comprehensive library of information about the different options available if you’re struggling.

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