Don’t make the wrong decision when you need debt help

posted by in Living with debt

Couple counting out money

Make sure you do the right thing

We regularly hear from people who have buried their head in the sand and let their debt situation spiral out of control. This can be due to having too many payday loans, spending too much on credit cards or any number of other reasons.

From the release of our 2011 Statistics Yearbook last month we already know that 45% of people wait over a year before asking for debt help. It seems as though people try and exhaust all possible options before admitting that they need debt help.

So what are these other options? And more importantly, what are the consequences of not getting advice from a free and impartial charity like us?

1. Borrowing from family and friends

This can be a tricky area, especially if the friend or family member takes the credit out on your behalf and can’t afford to repay it themselves. Provided that you budget carefully and your circumstances don’t change there shouldn’t be any problems.

However, we all know that life isn’t that simple and a slight adjustment in your income or expenditure could mean that you can no longer afford the loan.

Is it really worth jeopardising your relationship when there could be other solutions available that you haven’t looked at? Be aware that if someone else offers to be a guarantor for you they could end up owing the full amount.

2. Overdrafts or personal loans

The most obvious route to stave off the debt collectors is to ask your bank for more credit.

But remember you need to make sure you can afford the repayments, so it’s important to review your situation and budget carefully before committing to anything. It’s not a way out of debt.

If you’re going to apply for more credit, at least consider a loan from a credit union. We love to sing the praises of credit unions and the great work that they do. They’re a great option for people who can’t benefit from high street lenders, usually because of a poor credit rating.

3. Applying for Social Fund money

If you’re on a low income or benefits and need help with important costs you may be able to get a Budgeting Loan from the Social Fund. This is completely interest free and you repay it at a reasonable rate that you can afford.

However, there is set criteria on who is eligible and what you can use the money for, and is only the ideal solution for someone who is struggling with certain priority costs.

You can read more about how they work and find out if you’re eligible to apply on the gov.uk website.

4. Taking out extra credit and debt consolidation loans

We’ve blogged before about why consolidation loans aren’t usually the answer to debt problems. There are many things to consider, but first and foremost they can often make the situation worse in the long term and simply end up prolonging the inevitable.

If you’re already struggling to maintain minimum payments on your debts it’s likely to mean that you won’t be able to afford the new loan repayments either. It’s also tempting to continue spending on the old credit cards once they’ve been paid off with the loan, meaning that you’ll owe even more money.

5. Applying for a payday loan

When times are hard or you’ve had a particularly expensive month – let’s say the MOT was due for example – it’s easy to be tempted by short term credit that’s readily available.

The problem with these lending solutions is that they charge very high interest rates and they often start a vicious circle. When you pay it back the following month, it’s likely that you’ll fall short of enough money again, requiring you to renew and take out another loan. Short term credit is a very expensive outcome; it’s better to avoid the payday loan headache altogether.

6. Going to a fee-charging debt management company

Debt management companies often target those in need of debt help with attractive solutions to clearing debts. But why pay for a service when you can receive advice and solutions from a reputable debt advice charity? You could save yourself thousands in fees and what’s more, you’ll be debt free quicker because all of your money will be used to pay towards your debts.

As you know, we say that you should never have to pay for debt advice. If you or someone you know is struggling, why not point them in the direction of our free and easy to use online advice service Debt Remedy.

7. Using a loan shark

Don’t even go there!

What did you do?

If you’ve already sought debt help and you’re on your journey to becoming debt free, how long did you wait before getting the right advice? Why do you think people wait so long? Answer our Facebook poll to let us know.

If you could turn back time would you change things and ask for help sooner?

We’d love to hear your thoughts on what we could do to help people realise that they can get advice now and help the situation from getting worse.

Pavan Gata-Aura is a qualified debt advisor with 6 years of experience. She enjoys spending time with her two children, fundraising for charities, has spent time volunteering in Africa and takes part in organised races.

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