In this section...
Do's and Dont's
Do's
Do get in touch with your creditors
- Start by making a list of all the people you owe money to and how much you owe them. Then talk to them, explaining that you are having problems and you
want to agree on the best way to pay the money back.
- Companies are more likely to be helpful if you contact them as soon as you realise there might be a problem paying a bill or making a payment.
Do give priority to those debts which could mean you lose your home or your gas or electricity supply
- Remember that creditors usually prefer small regular payments rather than larger, irregular payments.
Do reply to letters from your creditors
- Keeping creditors informed of your situation allows them to work with you to reduce the debt.
Do keep copies of all letters and statements
- This will help you to keep to any arrangements you have made with your creditors. Keep copies of letters you send them, not just those you get back.
- Sign and date any letters you send.
Do work out a personal budget
- Follow our straightforward budget advice. This will help you to work out how much you can afford to repay while still making the other payments you have to make every month.
Do avoid getting into debt again in future
- Check out the rest of the ask:ted website for tips on avoiding further debt.
Don'ts
Don't give up trying to reach an agreement.
- Your creditor may refuse your first offer, but keep talking to them.
- It's always best to show you are serious about working with your creditor to repay your debt.
Don't let your creditor bully or threaten you into making a promise that you can't keep.
- Always be honest and realistic about what you will be able to repay by a given date. Don't just tell your creditor what they want to hear.
Don't borrow more money to pay off your debts, especially by taking on more credit or store cards. This will just increase your debt and make the problem worse.
- If you do choose to get a loan – for example, if you know some money is due to you in the longer term but need to repay a debt in the short term – talk to a debt adviser such as Debt Line first, to check this is the best option for you.
- Never use high-interest loan sharks or doorstep lenders. Find out how to get affordable credit – but avoid loans altogether if possible.
Don't ignore the problem.
- Your debt will just get worse if you ignore it, and cause you more and more stress.
- The people you owe money to will be less understanding if you have let the debt grow before contacting them.
Be safe
Two major causes of debt are:
- identity theft and
- borrowing from doorstep lenders, or illegal loan sharks, who charge such high interest that it could take a lifetime to repay your debt.
Identity theft
Identity theft is a crime. Someone steals and uses someone else's personal information, like their name and banking passwords, and they then use this information, usually to get money.
Here are some frightening facts about identity theft.
- Someone uses a credit card with stolen details every eight seconds.
- Experts report that it can take a victim from six months to two years to clear their name after their details have been stolen.
- A quarter of adults have been a victim of identity theft, or know someone else who has been.
There are many simple things you can do to protect yourself against someone fraudulently using your personal information.
Loan sharks and high-interest loans
People on low incomes, who cannot get loans from high-street lenders, often feel they have to use doorstep lenders and loan sharks. But the interest payments demanded by these lenders are so high that borrowers can be in debt for life. They may also be harassed or threatened if they get behind in payments.
But you don't have to use doorstep lenders or loan sharks. You can now get a low-interest loan you can afford through not-for-profit lenders, like credit unions.
- Read more about the dangers of loan sharks and how to report suspected illegal lenders to your local trading standards office on the DirectGov website.
Budgeting
The best way to stay out of debt, or plan repayments if you're already in debt,
is to work out a personal budget and stick to it. A budget will help you to work
out how much spare cash you actually have.
A good way to begin is by using an online budget calculator. Just type in your regular
bills (for example, rent and council tax) and the calculator will then work out
your budget for you.
- Use ask:ted's
free Budget calculator.
- Download the budget planner(PDF, 72k) from the British Bankers Association
website and fill it in by hand. This might be useful if you want to keep a record
of what you spend on different things.
- Read a guide to creating a personal budget and managing your money on the DirectGov website.
- Check out
Face2Face with Finance, a Royal Bank of Scotland website with tips and tools
for budgeting.
Quick tips for saving money
Keeping to a strict budget each month isn't always enough, especially if you're
in debt. It's helpful to have a close look at your outgoings to see whether you
could be paying less.
Here are some useful tips for saving money on everything from electricity and groceries
to days out with the children. Remember, even if you only make small saving here
and there, these add up to big savings over time!
- Get a bank account. It's often cheaper to pay bills by direct debit, and shopping
online using a debit card can be cheaper too. You can now apply for a basic bank
account even if you haven’t been able to in the past.
- Find cheaper days out in Wakefield or find bargain trips to other places on the Day Out With the Kids website.
- Save money by using less energy in the home - read our top ten tips.
- Visit the Moneysavingexpert
website for tips on how to save money on shopping, bills, banking, transport, travel
and more.
- Compare prices to find the best deal on electricity and gas suppliers, home phones, insurance, bank accounts and more,
using websites that compare prices such as Moneyexpert,
Energyhelpline , and uSwitch.
- Use the discount vouchers offered by many shops. You can use some of these only
if you buy online, so it's worth getting a debit card if you don't already have one.
The Quidco website offers discounts and direct cash back when you buy products
through their site.
- Food you prepare yourself can be cheaper than buying ready meals or going to a take-away. Tips can be found on the following sites
www.studentrecipes.com, www.moneysavingexpert.com.
- Save in advance for Christmas - avoid starting the new year in debt.
- Don't pay high interest rates. You can now get an affordable, low-interest loan.
- Live cheaply! The Frugal website
has tips on a range of ways to save money on food, cleaning products, internet connections
and more.
Christmas Spending
Christmas creeps up on us so quickly, it's easy to find you don't have enough money to pay for things like presents and extra food. This is why so many of us get into debt at Christmas time.
A good way of avoiding this is to put a bit of cash away each week, so by the time next Christmas comes, you'll have enough to buy what you need. There are lots of easy savings and voucher schemes that help you do just that.