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Obtaining credit is becoming increasingly easy for UK consumers, to the extent that debt is now a fact of life for many people.
Some Causes of Debt
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Sudden changes in circumstances causing loss of income, e.g. through losing a job. |
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Too many credit or store cards and getting credit too easily. |
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Unrealistic expectations - not having the income to support what you want or giving in too easily to what children want. |
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Moving loans from one company to another. |
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Borrowing more before paying off your existing loans. |
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A business failure - so that business debts then become personal debts. |
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Not having money set aside for an emergency. |
Avoiding Debt
One of the most common forms of debt is caused by overspending on credit cards. Remember that as soon as the account goes negative the cardholder is in debt. (It isn't the case that debt only occurs when the credit limit has been breached).
Subscribe to a credit card with a low rate of interest. Many people pay over the odds for credit, but there are plenty of good deals on the market offering rates of interest between 0% and 6%. However, if you opt for a card which has a 0% rate of interest, this is likely to be for a limited period only - so switch to a better rate when this period expires.
In general, avoid store cards unless you are sure that you can pay off your balance within the interest-free period. Interest rates for store cards are much higher than for normal credit cards - the average rate being around 28-30%.
Try to arrange an authorised overdraft if you are likely to incur an overdraft at the bank. You are likely to be charged less for this than if you overdraw without authorisation. But of course it is better to avoid using even an authorised overdraft.
Shop around to find a good deal if you need to take out a loan- and only go to a reputable lender. Repay loans as quickly as possible in order to reduce the amount of interest you have to pay.
If you think that you are in danger of going into debt, don't ignore the problem. Seek advice.
You can ask any company that turns you down for credit to tell you whether a credit reference agency was used. If it was, you have a right to ask to see a copy of your file.
Contact the credit agency concerned and request a copy of your file. The three main UK credit agencies are: Equifax, Experian, Callcredit.
If there is any dispute, you can appeal to the Information Commissioner's Office.
Before getting yourself deeper into debt by borrowing more money, take stock of your situation. Write down details of everything you owe and speak to each of your creditors explaining your situation. Try to agree a sum that you can pay immediately and arrange a payment plan for the balance.
If possible try to avoid using a debt management service. Above all get independent professional advice.
Give priority to your mortgage if you have one. Your lender may allow you to pay a reduced amount until your circumstances improve.
Try to avoid being declared bankrupt, because this will have long-lasting implications. The Insolvency Service has further details about bankruptcy.
Insolvency Helpline
Aims to provide you with the best free advice to solve your debt problems.
National Debtline
Provides free confidential and independent advice on how to deal with debt problems.
Debt Advice
Get professional help and debt advice.
Debt Help UK
Offers comprehensive free information, advice, sample letters, and its own discussion forum.
See UKorbit's Financial Page for general financial advice
Visit UKOrbit's Consumer & Advice Centre for further help and information.
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