What debt help is available?

There are several different types of debt help available to people struggling with their finances. If you are in debt, the choice can be confusing or even intimidating, so it’s important to understand each option before making any firm decisions.

Debt advice

• A little debt advice may be all you need to get your finances back on track, and many organisations will offer free debt advice - budgeting tips, for example, or help negotiating with creditors.

• When you speak to a professional debt adviser, they should be able to suggest ways you can improve your financial situation now and look after it in the future. They should also be able to advise you on whether or not you require a specific debt solution, and if you do, which one may be most suitable for you.

Debt management

• Debt management may be suitable for you if you can’t make the agreed repayments to your unsecured debts. It involves talking to your unsecured lenders, asking them to accept lower monthly payments based on what you can afford after your essential expenses (mortgage/rent payments, utility bills, etc.) have been covered.

• Some people will negotiate with their lenders by themselves, while others will ask a debt management organisation to do it on their behalf.

• By reducing the cost of payments to your unsecured debts, debt management should also mean you’re able to stay on top of payments to your essential expenses every month.

• Please bear in mind, though, that creditors aren’t obliged to accept any changes to the existing repayment plan.

• It is important to note that by reducing the amount you pay each month, you will be paying your debt off for longer. This could result in you paying more overall, due to the interest added to your debt on a monthly basis. However, lenders may agree to a freeze or reduction in interest.

• By repaying your debts more slowly, you will be defaulting on your original repayment agreements. This can be recorded on your credit report, which could affect the cost and/or availability of credit for 6 years. Bear in mind, though, that this may happen anyway if you can’t keep up with the payments you originally agreed to.