This winter is going to be challenging for millions of households, particularly for those on the lowest incomes.
For people who might have fallen behind with credit commitments due to the cost of living, it can be difficult to know how to deal with your debt and prevent it from escalating.
It’s useful to understand that certain types of debt can be more problematic than others if you are unable to pay them.
We call these “priority debts” - and they include your mortgage, rent, energy bills and council tax, among others.
They’re classed as priorities because the consequences of not paying them are greater than the consequences of not paying others, and therefore should be the payments you address first.
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Once you’ve dealt with your priority debts, try to meet the minimum payment on every debt you have each month, to avoid default charges and the effect on your credit rating.
After that, you should pay most towards the highest-cost borrowing – that’s the debt on which you’ll have to pay most interest and charges.
If you don’t have enough to cover all this, that’s a clear indicator that you could benefit from debt advice.
When considering applying for credit, there are certain things to take into consideration to reduce your risk of experiencing problem debt.
If you are looking into taking out credit to pay for your essential costs, we would urge you to seek advice from organisations such as StepChange, as borrowing more if you already struggling may only exacerbate financial problems.
Before you do borrow money, ensure you take time to do your research to find out what’s on offer.
Try to avoid being drawn into taking out short term, high-cost loans as their incredibly high interest rates can make any delay in repayment extremely costly.
If you have a poor credit history, you may feel that high-cost credit is the only option available to you.
However, you may be eligible to get a loan from a credit union, which may be able to provide loans at lower interest rates and help you with saving.
To find out whether your local credit union might be able to help you, find a credit union near you, and get in touch with them.
Mostly importantly, if you do borrow money, make sure to budget and plan ahead so you can afford to make repayments.
If you’re worried about how you’re going to keep up with your gas and electricity bills, speak to your supplier as early as possible, and let them know the situation you’re in.
All energy companies have an obligation to deal fairly with customers who are struggling financially, or are vulnerable for any other reason, such as age or health.
Your supplier can tell you if there are any hardship grants available to help you pay off a utility bill, or you can negotiate an affordable payment plan.
StepChange can also help you with managing energy arrears, and take you through free and impartial debt advice, which will be tailored to your specific circumstances.
If you’re experiencing problem debt or are feeling stressed about money, you don’t have to suffer in silence.
The sooner you reach out for help and speak to someone about what you’re going through, the sooner you can get your finances back on track.
- Contact Stepchange.org for online debt advice 24 hours a day, 365 days a year, or call 0800 138 1111, Monday to Friday 8am to 8pm and Saturday 8am to 4pm
