How To Get Out Of Debt, As Record Numbers Of People Seek Help

Don't panic or bury your head in the sand.

Record numbers of people are seeking debt advice in 2019, a charity has revealed.

More than 330,000 people have contacted the StepChange charity for help with their debt in the first six months of 2019, it said. It is the biggest half-yearly total that the charity, which has a 26-year history, has seen.

These people had £13,799-worth of non-mortgage debt on average – a 2% increase compared with six months earlier and a 6% increase since 2016. Unexpected life events were the biggest causes of problem debt.

Phil Andrew, chief executive of the charity, said these statistics provide a “sobering assessment” of the scale of problem debt in this country.

“Across the board, we are seeing red flags, including worrying proportions of new clients falling into debt due to reduced income, illness or because they rely on credit to pay for day-to-day living expenses,” he said, adding that the figures “must act as a wake-up call to the Government”.

If you are in debt – for whatever reason – then you’re not alone. Whatever your situation, here’s how to make a start on clearing it.

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It might not be pretty, but face the facts

People are in debt for lots of different reasons. But the first thing to do if you feel you are heading into the wrong direction is to face the situation and ask for help.

“The first step would be to not bury your head in the sand as much as you can,” explains Richard Lane, director of external affairs, at debt charity StepChange. “A lot of people find confronting money problems really stressful and difficult – and what we’d say to people is that they’re not on their own with this. There’s a lot of help out there and that the earlier you get that support, the easier some of the solutions might be.”

You can access free advice through Citizens Advice, the charity Step Change, the Money Advice Service and National Debtline. They can help you to prioritise your payments depending on your individual circumstances, and work out ways you might be able to consolidate your debts into one lower interest loan that’s easier to pay off.

If you are entitled to benefits, a debt charity can help you to work out whether you’re getting everything to which you are entitled.

“Getting into problem debt can happen to anyone, we absolutely never judge and we believe there’s always a way out,” says Lane.

Sit down and work out what you earn (and what you owe)

Whether you’re heavily in debt of you’re just looking to tighten up your finances this year, it’s important to know what you owe. Lane recommends working out exactly what you earn each month and exactly what you pay out – which means adding up things like bills, subscriptions, credit card bills and pay day loans as well as getting real about where you spend your cash.

“Write down a really honest account of your expenditure – how much are you spending on food, on going out, on your mobile? Quite often people don’t have that overview and that’s a really good first step.”

Become a savvy consumer

Once you’ve taken a look at what you owe, no doubt you’ll be able to find ways you can tighten up the belt a little.

Phone your energy suppliers and your phone bill provider and ask them if there’s any way they can give you a better deal. Many people are loyal to a provider they’ve been using for years, but this often means you’re not getting the best deal. If you tell the company you’re shopping around, they might incentivise you to stay. If you find a better deal elsewhere, then switch.

Avoid rent-to-buy schemes on items like household appliances if you can because you could end up paying four times what an item is worth. If you can’t afford to buy an item up front (and not everyone can) then it’s worth finding out whether other forms of credit might be cheaper in the long run.

Get rid of any subscriptions you don’t use or can’t afford

Got a subscription to Netflix, Amazon Prime Video, Apple Music, Spotify or a gym membership you don’t use but somehow feel healthy just having? If you’re not making the most of them then give yourself a breather and cancel them while you sort out your finances. You can redirect that money into paying off some of your debt. Or even into savings if your financial situation permits it.

If you have savings, work out what to do with them

Let’s be realistic. Not everybody has savings – especially when they’re struggling with debt and the costs associated with day to day living. But if you do have them, work out whether it’s best in the long-run to redirect them into settling a debt or to keep them.

“It might seem like a good idea every month to be putting £20 into an ISA if you can – but actually if you’re making less interest on an ISA than you’re paying on a credit card [you should] absolutely be paying down those things first and making sure the priority is paying down those things that are racking up the interest and the debt,” Lane advises.