Running Into Debt: UK Guide to Options & Staying Calm
When you’re struggling with debt and looking for solutions, you will find options, methods, and terms you’ve never heard of pop up.
Trying to resolve or understand debt resolution options in a situation that makes you feel pressured is never ideal. That’s why we encourage everyone to educate themselves financially as early on as possible in their life. After all, you never know what’s around the corner.
We are here to give you the facts, no sugar-coating, no bias. We are not here to influence you; we will provide you with our opinion, take it or leave it. Remember, any decision you make is the right one, so long as you make it with all the facts intact.
We’ll help you understand where to start, the mindset considerations, some technical factors to consider, types of debt, and some key options to understand to help ease payment pressure. Hopefully, you’ll never need to use it!
What To Do When You're Struggling with Debt
Where To Start: Two Initial Paths
When a person has reached a point where they can no longer make the contractual payment towards their debt, there are two main routes they turn to:
- Do nothing, i.e., make no payments and/or do not communicate with the creditor or debt collector
- Do something, i.e., make some payment and/or communicate with the creditor or debt collector or seek advice or help from someone.
The routes may sound simple and obvious, but there are various routes with various outcomes to be considered based on the details of your circumstances and the type of debt you have entered into. If you take the wrong path, you may have an even bigger issue than the one you started with! Knowing your stuff is key.
The Risk of Doing Nothing
Doing nothing is a risk. How large a risk it is depends on the appetite of the creditor or debt collector recovering the debt. You might think throwing the recovery letters away or piling them up in a corner is okay and that the company trying to recover the debt will get bored and move on. If the company chasing wants you to pay, this tactic will likely put you in a much worse situation, which could include legal action. Read our article What happens if you ignore debt collection letters? In the purple box below.
Stay Calm: You're Not Alone
Staying calm is crucial, but it is also easier said than done. Millions of people in the UK—and we mean millions—struggle with debt and don’t know what to do, leading to panic. Because of this, measures had to be put in place to help those struggling. So be rest assured, there is a way out.
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Key Factors to Understand About Your Debt
Secured vs. Unsecured Debt: Knowing the Difference
Is it secured or unsecured? If you don’t know this, you must find that out first. You should always be clear about this before entering into any credit agreement.
If it’s secured, an asset attached to the debt may be at risk. Unsecured debts (e.g., credit cards, personal loans, overdrafts, etc.) are lower priorities than secured debt, so focus on unsecured debt when seeking ways to relieve your financial strain.
Is the Debt in Your Name Alone or Shared?
If you have taken out joint borrowing, both parties are affected by any actions regarding the debt. For example, if the monthly payment is £200 and you both agree to pay £100 each. If one of you pays while the other doesn’t, the creditor will consider that both of you are not keeping up with the agreement. You should always communicate with the other party if you are struggling; any failure on your part to make a payment affects both of you. Check out our articles on buying a property with your partner and guarantor loans in the purple box below.
Potential Payment Relief Options
Now let's take a look at some possible arrangements to help with your payments.
Payment Holiday: A Temporary Pause
Creditors do not like to end credit agreements abruptly, so they will try and find ways to keep the agreement going by looking at options. If your payments become unmanageable and you believe the issue will be temporary, you should always request a payment holiday. Ensure that the creditor’s payment holiday terms don’t mean that when you resume payments again, you don’t have to pay more each month to cover the months you’ve not been paying. You may also want to ensure this will not affect your credit rating.
Extending the Term: Lowering Monthly Payments
Always check if you can extend the term of the agreement. For example, if you have a loan to pay over 24 months, extending the length of the loan to 36 months should help lower the monthly amount. This may solve the issue you are facing, as your payments would be more affordable.
Debt Consolidation: Proceed with Caution
We at The Real Debt Guy never recommend borrowing, but this may be an option to reduce your monthly payments. To understand more about debt consolidation, read the article in the purple box below.
Debt Consolidation
Balance Transfer: Read This Before You Try It
We have to discuss this as you may find this suggestion offered to you. Transferring your current debt to another credit facility at 0% interest or a very low interest rate should help relieve the debt issue.
However, it’s important that you read our article about this, as this process has some fundamental flaws. The article is in the purple box below.
Balance Transfers
When All Else Fails: Exploring Debt Resolution Options
We got you covered. We have a dedicated section on this site that covers debt resolution options in detail. Do make sure you read The Real Debt Guy’s Final thought at the end of each article.
It’s important for us to make sure you have all the information to make an informed decision even though we may not necessarily believe the option is a good idea. Click here to check out this section.
It's good to talk
We want to help build generations with proper financial education regarding debt. The only way debt issues can be avoided is by understanding the subject and talking about it. If things get tough, you should always have someone you can speak to, like a friend or a relative. If you don’t feel comfortable talking to someone close to you, we have The Real Debt Guy community here to support you.