How to deal with debt

When you don’t have enough money coming in to cover all the things you have to pay out, it can be really worrying. If you’re struggling with debt, you’re not alone. With the right information, you can take back control and get savvy about your spending. It might not be easy or quick, but debt and financial concerns can be overcome. We share some information and advice on how you can start to get out of debt. Learn more about:

What is debt?

A debt is something, usually money, which must be paid back to someone or an organisation that loaned it to you in the first place, normally with some additional cost. Anyone who uses an overdraft on their bank account, has a mortgage or who owes their mate £20 has debt. That’s nearly all of us, right?

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Common Types of Debt

Whilst there are lots of different types of debt, credit card debt, mortgage debt and personal loan debt are some of the most common.

Credit Card Debt

With credit cards, you can spend money up to a certain limit. Watch out when using them as if you don’t pay back everything you’ve spent at the end of each month, you can be charged a hefty amount of interest on them. This interest makes it harder and harder to clear your credit card each month as the amount you owe will keep growing if it’s not paid back. This can lead to debts spiralling out of control, so it’s important to keep an eye on it!

Mortgage Debt

If you want to own your home, you’ll probably need to take out a mortgage. A mortgage is essentially borrowing money that will only be used to buy property or land. As this is usually a large amount of money, they tend to take a long time to pay off - 25 years on average! Mortgages are ‘secured loans’ which means that your home will be used as ‘security’ for the lender so they can be sure they’ll get their money back. Unfortunately, this means that if your repayments aren’t made on time or in full, your mortgage lender could sell your property to get the money that’s owed to them.

Personal Loan Debt

Personal loans are often used to cover unexpected costs, like a broken washing machine, as well as for home repairs, buying a car and paying off other debts, for example. You can get personal loans from banks and other finance companies, and you’ll need to pay off the loan as well as interest on it in agreed monthly instalments that last for a specific time.

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What are priority debts?

If you’ve taken out different loans from a few different companies, it can be confusing to know where to start when paying everything back. Don’t worry, not all debts are created equal and we’ll talk you through the difference between priority and non-priority debts.

Priority debts

Priority debts are those that have the most serious consequences if you don’t pay them. They don’t have to be the largest or have the highest interest rates, but if you don’t pay them it could lead to serious problems. The consequences of not paying off priority debts could be losing your home, receiving a court summons, being visited by bailiffs, facing bankruptcy or having your electricity or gas cut off, so it’s important that these debts are paid off first.

  • Rent arrears
  • Gas arrears
  • Council Tax
  • Water rates
  • Electricity arrears
  • Benefit overpayment
  • Telephone if required for emergency use
  • Mortgage arrears
  • Court fines & CCJ's
  • Hire purchases (which are essential, such as a car to get you to work)
  • Secured loans (which are secured against your home)
  • Child maintenance
  • TV licence
  • Tax
  • VAT & National Insurance

Non-priority debts

Don’t be fooled by the name of these debts- it doesn’t mean that these bills don’t need paying! It’s just that the consequences of not paying these debts are less severe than not paying priority debts, so start by paying off priority debts.

  • Overdraft
  • Credit card
  • Loan
  • Doorstep lenders
  • Store cards
  • Catalogues
  • Hire purchase (non-essential), TV etc)
  • Personal loans

Why you should pay your priority debts first

While it’s important to pay off priority debts first, non-priority debts still have consequences, for example your creditors could pursue legal action against you and your credit score could be damaged. It’s important to bear in mind that it’s not a good idea to pay one creditor in full while not making any payments or reducing payments to another. Although it may feel intimidating, speak to a debt advisor to get advice on the best way to deal with your specific situation. StepChange or Citizens Advice can help you make a plan, let you know how to tackle your debt, and advise you on how to deal with creditors, and you’ll feel heaps better for it!

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If you’re in debt

Debt can be caused by any number of things – maybe your base salary is making it difficult for you to pay the bills, maybe you’ve just had a child and are feeling the effects financially, or maybe your nights out and splurging on the perfect outfit could use a budget plan. Whatever it is, most people have debt, but how much debt is too much?

When to seek help for debt

If money worries are stressing you out, stopping you from sleeping or if you’re struggling to pay bills or using credit to pay them, this could be the sign to reach out and get some support.

Regularly worrying about money

You’re not alone if worrying about money is keeping you awake at night. 77% of adults surveyed said they felt very worried or somewhat worried about the rising costs of living (ONS 2022).

Struggling to pay bills

It can be all too easy to put off paying bills but ignoring them will lead to more serious consequences. You may be able to pause your payments, pay smaller amounts or be entitled to certain benefits. Citizens Advice can guide you through all the options available to you if you’re struggling to pay bills:

Relying on overdraft or credit cards

Using overdrafts or credit cards isn’t necessarily a bad thing to do. However, if you’re only making the minimum payment each month, you’re always in your overdraft or making it habit to pay bills using credit, you’ll benefit from getting your finances in shape.

Missing Credit Card Repayments

While it might not seem like it’s a big deal to be late on a credit card payment or skip it entirely for a month, this can lead to a ‘missed payment fee’, it can really impact your credit score and make it difficult for you to get credit in the future.

Hiding spending habits from family

If you are normally open with your partner or family about money but start to feel like you must hide things, this could be a sign that you need to get help.

Avoiding creditors

It can be super tempting to bury your head in the sand, not to open letters and avoid phone calls but communicating with your creditors may improve your situation. Get in touch with them as soon as possible to explain why you are in debt. There are time limits on when some creditors can go to court to get you to pay a debt. If you think the time limit has run out, you should get advice immediately. It’s difficult but taking the step of getting in touch with a debt advisor can lift the weight off your shoulders, relieve your stress and put you on the right track. Don’t ignore letters or phone calls from your creditors.

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How to deal with debt

If you’re in debt, do not despair. We are confident that you can overcome your debt with the right resources, support and plan. Trust in yourself, speak to someone who can help, stick to the schedule and although it won’t be easy, you’ll feel more in control of your financial situation.

Don’t ignore it

It’s all too easy to ignore letters and calls from creditors, however if you do, you could miss important information such as your debts being referred to a debt collection agency or court actions. Even though it may feel very uncomfortable and stressful to do this, you can call creditors to speak about your options. They are not obliged to do this, however they may be willing to work with you and try to find a solution to managing the debt. Even though it may feel overwhelming, it’s better to keep in communication with them rather than you facing serious consequences as a result of ignoring their calls or letters.

Understand Your Money

Get organised! Make sure you know exactly how much you owe and who you owe it to.

Deal with your priority debts

If priority debts aren’t paid, they will have the most serious effects on your life, so make sure you pay these debts off first.

Debt Consolidation

Debt consolidation is when you take out one loan to pay off all your debts, so you have just one loan to pay back with one interest rate and potentially a lower monthly payment. If you have debts with a few different people or companies, debt consolidation can simplify your payments. However, debt consolidation isn’t right for everyone as you need to make sure you can afford the monthly repayments on your new loan and that your new interest rate is less than what you would be paying without the consolidation loan.

Learn more about consolidation loans here or speak to someone who can help you see if a consolidation loan would be a good option for you. 

Debt Management Plan

Debt management plans basically make it easier for you to pay back your debts by making an agreement with your creditors, usually to reduce your monthly repayments. The plan will also include a budget that includes everything you need in the month and make sure there’s cash available for the repayments too. Some organisations can create and manage this plan for you but watch out as some companies will charge you for this. Head to an organisation such as Step Change who provide these plans for free. 

Speak to a debt adviser

Speaking with someone about dealing with your money worries, can really help. Reach out to Citizens Advice, StepChange or National Debt Relief. Most organisations have options for online chat if you would prefer this rather than a phone call.

If you’re thinking of borrowing

If you don’t have any savings and your income has reduced, borrowing may feel like your only option. Before you borrow:

-make sure that you understand what money you have coming in and going out
-reduce spending on any unessential items
-make sure you have claimed all the benefits you are entitled to

Try and use borrowing as a last resort. If you do need to borrow, make sure you choose the right type of credit or loan for your situation. Otherwise, you could find yourself paying more than you need to. Make sure you look at how much you will repay in total, whether you can afford the repayments and any penalties for missed or late payments.

Avoid payday loans, loan sharks and high-interest credit cards. There are other options like credit unions and responsible finance solutions.

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Debt and Mental Health

86% of survey respondents said that their financial situation had made their mental health problems worse and 72% of respondents said that their mental health problems had made their financial situation worse (Money and Mental Health). The relationship between mental health and money worries can be complicated but it can be helpful to learn how mental health can affect your money and vice versa.

How poor mental health can affect finances

If you suffer from depression, you may feel a lack of energy or motivation to sort out your finances or track how much you’re spending. Mental health problems may make it more difficult for people to be in full-time work, manage their money and make good financial decisions. Specific conditions such as bipolar can lead to people experiencing episodes of mania which may lead to impulsive spending.

How debt can affect your mental health

Money problems can lead to anxiety, stress and problems sleeping. If you’re cutting down on costs such as food or trying to use less energy for heating, this can affect your health. Equally, if you’re trying to spend less on going out for drinks or eating out, this could lead to feeling socially isolated. There is a strong link between problem debt and suicide, and more than 100,000 people in England attempt suicide while in problem debt each year (Money and Mental Health).

We’re not taught how to manage our finances in school, and no one enjoys dealing with debt. Reach out to someone who can help, claw back the feeling of control over your finances and see the difference it can make to your anxiety and stress levels.

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Who to contact for support

Here’s a few great organisations you can turn to for help with debt.

Ben - we’re here for you

If you want someone to talk to, talk to us. We’re here to help. You can call us on 08081 311 333 or chat with us online.
We are here for anyone who works, or had worked in UK Automotive, and their family dependants. If you’re not sure if or how Ben can support you, please get in touch. Our friendly helpline team will be able to chat through your options and support you in a way that works best for you.

To get free regulated debt advice you can contact:

Citizens Advice

Step Change




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