Lifestyle Guides

‘I think I’m in debt – what now?’

Being in debt is a fact of life for some Britons, but people can feel very differently about the amount they owe banks, building societies, credit card companies or even family

man worrying about debt

According to the debt charity StepChange, in December 2019 3.2 million people in the UK were struggling with severe problem debt – a term used when people can’t afford to pay their household bills or keep up with their debt repayments. Another 9.8 million people were showing signs of financial distress. 

Following the measures taken by the Government to try and stem the spread of Coronavirus, things have got far worse for many people. Since lockdown, 2.8 million people have fallen into arrears on utility bills, council tax and rent, with 4.2 million people borrowing more to make ends meet.

The UK’s Prime Minister Boris Johnson has said the latest round of Coronavirus restrictions could be in place until March 2021, which means many more people could face a debt burden they simply can’t manage. 

How do I know if I have problem debt?

For each of us there’s a different point where debt becomes a problem and it’s important you know how to identify this. You may be struggling to make repayments, your credit cards may be maxed out or you may be struggling to meet other priority bills such as water, gas or electric. 

But knowing how to deal with this is vital, and there are a number of things you can do to help get yourself out of a debt hole.

1. Ask your creditors for help

This may be the last thing you want to do – after all these are the organisations you owe money to. But think again. Many people will feel their situation is a lot worse than it really is and speaking to your lenders could quickly put your mind at ease.

They can help in a number of ways, including:

  • Providing a sustainable arrangement based on your personal circumstances
  • Freezing or reducing interest payments
  • Agreeing to an Individual Voluntary Arrangement (IVA) which is a formal way of creating a debt repayment plan you can manage
  • Even agreeing to write off some of your debt

2. Talk to debt charities

It’s less easy to see someone in person during the pandemic, but these debt charities are still available to provide help to anyone who’s struggling with their debt burden:

Also consider speaking to these charities if your debt burden is affecting your mental health:

3. Speak to family or friends about your concerns

It isn’t easy telling friends and family you’re in financial trouble. Money is one of the last taboos for many people. But dealing with the pressure of spiralling debts alone isn’t a good idea, so find someone you trust that you can speak to who will offer emotional support.

At times it may seem difficult, but it’s better to be open and honest with those closest to you. 

4. Work out a budget and review what you can cut back on

This is a question of sitting down and going through your bank statements to look at your income and outgoings. Put each in a column and tot up the totals. If your outgoings are above your income, then look at what you can cut back on to balance your own books. 

For example, we don’t recommend cancelling any direct debits without speaking to your lender first, but you may have forgotten to cancel less priority direct debits that should’ve been cancelled, such as gym memberships or magazine subscriptions and the like that you no longer need. All of these can be cut back to make your money go further.  

Also, look at where you can reduce your bills – check your car insurance, home insurance, energy bills and so on are not costing you more than they should. It may take an hour or two to go through all of this, but it’ll be time well spent. You can use a budget calculator to help you, like this one from Citizens’ Advice.

Debt is a fact of life, but for so many of us getting into financial difficulty can be a hard burden to carry. So, if you’re struggling with your debts, take some of these steps to help you navigate your way out of your current financial problems.

I’m a highly experienced, multi-award winning finance journalist and broadcaster, having worked on The Daily Telegraph’s personal finance desk and in the City office for more than six years from 2000 to late 2006, becoming the deputy personal finance editor in 2004. I was the financial journalist behind the hit Channel 4 personal finance show Superscrimpers and my agency – Moneta Media – is a specialist communications agency, delivering content, SEO and PR for financial services and professional services businesses.