At the beginning of February 2023, the Bank of England decided to raise the base interest rate to 4%. This makes interest rates the highest they have been in the last 14 years. With fuel and utilities prices at a high and prices of food items increasing, people are struggling more than ever with managing debts.
For those who have a lot of debt, there are some things that can be done to help the situation. The sooner you look into managing your debts the better your situation should be. It may be possible to take to your creditors and look at ways that you can pay or even create a formal agreement. This is referred to as a “debt solution”.
What are your options for managing debts?
The most appropriate solution for your circumstances will depend on the type of debt that you have. Plus, the total of your debts and how much free money you have to help pay your debts.
If you are in a position where you have some money to pay off your debts then you could make an arrangement with your lender. They may allow you to pay things off slowly over a couple of years. You may want to consider a debt management plan, an IVA (individual voluntary arrangement) or an administration order.
If you don’t have the money and you owe less that £30,000, you may be able to apply for a DRO (debt Relief Order). Bankruptcy may be an option if you owe over £30,000.
The option that you choose will have an effect on your life. Therefore, it is really important to talk to your lender first. The things that can be affected are your mortgage or savings, and your credit rating. Sometimes, it may even have implications for the job you do.
Talk to your creditors
The first step before you opt for any debt solution is to talk to your creditors. There is always a possibility of coming to an arrangement that will allow you to pay your debt over time and in smaller amounts. Remember, if they have money coming in slower, but on a regularly scheduled basis, this is better for them than no money coming in at all.
If your circumstances have changed, you should talk to your lender. You can explain the situation so that you can make alternative arrangements to pay your debts to fit with the new circumstances.
Give yourself some breathing space
The government backed “Breathing Space scheme” can be invaluable when it comes to looking at your options. Under the scheme, your lender is required to give you 60 days of breathing space when you cannot be contacted. Action cannot be taken to make you pay. Plus, interest and changes cannot be added to your debt.
This covers most types of debt, but you will need to check with a debt adviser first that your form of debt is covered.
If you are having treatment for a mental health crisis, then you may also be able to get assistance for the duration of your treatment and for 30 days after. Your healthcare provider will be able to help you talk to your lender.
