How to manage and reduce your debt

The number of people struggling with money has skyrocketed over the past 12 months, according to debt charity StepChange. His research found that 45% of UK adults had struggled to cope with household bills and loan repayments in recent months, up from 30% a year ago and 15% in March 2020. So if debt is becoming a problem for you, what can you do?

Recognize the problem

Another study by StepChange showed that 55% of its customers had waited more than one year before seeking debt relief. Sue Anderson, spokesperson for StepChange, said: “Many people have waited and suffered in silence. They try to use other coping mechanisms before contacting us. »

Reasons for the delay vary, but stigma remains a real problem. Research from the Financial Conduct Authority (FCA) shows that 42% of people who were in financial difficulty and ignored attempts by their lenders to contact them about missed payments, did so out of shame. /p>

Misconceptions about how people get into debt persist - and many people who find themselves in trouble worry that others will think the problem is the result of poor money management. In fact, StepChange claims that the vast majority of its clients have found themselves in financial difficulty due to a life change that has resulted in a sudden drop in income: layoff, bereavement or poor health can all, of course , have a serious impact - and more recently, soaring energy, food and fuel bills have put people in trouble.

Whatever the reason, Anderson says, "As soon as you recognize you might be in trouble, you should act.

Be clear about your priorities

Identify your priority debts (where the consequences of default are potentially very serious, such as rent or mortgage arrears, energy bills, council tax, and court fines) and make sure you tackle them first.

>Contact your lenders

"Every organization knows the economic landscape current situation, and they are all committed to doing what they can to help customers," James Jones, head of consumer affairs at credit referencing firm Experian, said. "In the first place, it is important to speak to the creditors or service providers concerned."

The cost of living crisis has caused a change in the areas of debt causing the most stress. Citizens Advice says that before the pandemic, municipal tax arrears were the most common form of debt, followed by credit, store and credit card debt. Today, energy debts are the main source of concern. Contacting the organizations you owe money to can mean you can negotiate a more affordable way to catch up on late payments.

Your energy supplier is responsible for help you find a solution - but if you don't get in touch and try to negotiate this, you could be in danger of having your service cut off.

If you're having trouble paying your credit card debt, the card provider may agree to let you take a break from repayments or pay a reduced installment.

For mortgage repayment issues, the lender may offer a variety of options, including taking a payment break, temporarily reducing monthly repayments, or adding your missed payments to your mortgage principal.

Different creditors may offer different solutions - and the options ns will depend on your circumstances and the extent of the problem.