When to seek help with your personal debt | moneyfacts.co.uk

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nigel woollsey

Nigel Woollsey

Online Writer
Published: 07/02/2020

At a glance

  • There are several debt warning signs that should serve to inform you that your use of credit is getting out of control.
  • If you are struggling with personal debt, there are strategies and organisations that can offer you help and advice.
  • Spending even more on credit is not a good way of digging yourself out of a debt hole.

Top debt warning signs

Problems with debt can come in many forms. However, there are some warning signs that indicate when debt might be starting to become a problem.

  1. Using credit cards to pay for everyday expenses such as bills or groceries but being unable to pay these off in full. Learn more about freeing yourself from credit card debt.
  2. Using cash advances as a way of supplementing income or to make other debt repayments.
  3. Missing or late payments for credit or other bills.
  4. Only ever being able to make the minimum repayment for credit cards.
  5. Never being able to clear or reduce their overdraft.
  6. Hiding debts from partners, friends or their families.
  7. Being declined for more credit.
  8. Not knowing how much they owe in total.
  9. No budget or spending plan.
  10. Overspending or living beyond their means.

See some more in-depth information about this in our guide on how to get debt free.


Money worries

Dealing with debt worries can lead to a range of emotional and even physical symptoms. Someone worried about rising debts can find sleeping difficult, may be unusually irritable, stressed, anxious, depressed or distracted.

They may find admitting to or talking about the problem difficult as they are embarrassed or want to hide problems from those they care about.

How to help someone combat anxieties about money

  • Encourage them to talk about the problem in a calm, non-judgemental way.
  • Reassure them that debt issues can be overcome and that they can get free help and advice on how to tackle credit problems.
  • Offer to help them access free advice and reassure them that they are not alone.

Making things worse: What not to do

There’s an old saying that applies well to debt: If you find yourself in a hole, stop digging.

If your debt is out of control:

  • Don’t ignore the problem – Accept that your debt is out of control. From here you can start to think about looking for help and guidance.
  • Don’t hide your problem – You don’t have to tell everyone but be open with those you trust. You might find that someone you know has been where you are now and might have some valuable advice or tips.
  • Don’t blow what little credit you have left on a spending spree – Some people’s reaction to the stress of financial worry is to spend more so they feel better about themselves.
  • Don’t apply for even more credit – Even if you are intending to consolidate the debts. Get help and advice first then consider your options.
  • Don’t turn to payday loan companies or unregulated lenders (i.e. ‘loan sharks’) – These charge horrendously high levels of interest that can quickly amount to far more than your original debt.

See more about the above in our how debt impacts your credit score guide .

Tips on ways to wean yourself off credit

There are a few tips and tricks that you can use to wean yourself off your dependency on credit. The good news is that your debt levels don’t need to be at critical levels to try these out.


Tip #1 – No cash? Don’t buy!

Set a rule with yourself that if you must borrow money to buy something, then you can’t afford it. Ask yourself: Do I need this, or do I just want it?


Tip # 2 – Focus on needs rather than wants

Before you spend money, ask yourself if what you are about to pay for is a ‘need’ or a ‘want’. Needs are things that you must pay for to live and carry out your normal life – things like mortgages, rent, money for electricity or gas bills, grocery shopping or petrol for your car so you can get to work. ‘Wants’ are the luxuries, treats and upgrades we buy ourselves – these are things like meals out, takeaways, non-essential shoes or clothes and entertainment like going to the movies or subscription tv services. See the section on the ‘50/30/20’ rule below for more information.


Tip #3 – Create your own emergency fund

Having an emergency fund you can dip into when unexpected expenses pop up is a great way to avoid adding to your total debt by using credit cards and such. Ideally, you should aim to have a savings pot for emergencies that is equivalent to three months’ salary. So, if you earn around £1,000 a month, your minimum emergency savings pot should be £3,000. This level provides a valuable buffer against both unexpected expenses and as a backstop should you find yourself suddenly unemployed.

Once you’ve achieved your target, keep going. The more you save the safer you’ll feel financially. And of course, when you have to make a withdrawal to cover that unexpected expense make sure you aim to build the pot up again as soon as possible.


Tip # 4 – Go back to cash

As much as everyone is in love with contactless payments these days, you can’t beat the old-fashioned way of sticking to a budget: cash. If the most you can afford on a night out is £40 then take that in cash and promise yourself that once it’s gone, it’s gone. No late-night visits to the ATM either.

This can work when shopping for other items too. Whether you are grocery shopping, buying clothes or going out, set a budget, take cash and stick to it.


What is the 50/30/20 budget rule?

If you are wondering how much you need to save from your wages, the 50/30/20 rule is a great help. Popularised by the US Senator Elizabeth Warren, this rule is simple and easy to follow.

Basically, you should divide your income up into these three chunks:

50% goes towards things you need

30% goes toward things you want

20% to your savings


Needs (50%) – These are all things that you must spend to live each month. It includes your rent or mortgage, all your utility bills, council tax, groceries, vehicle fuel and credit repayments. If you are spending more than 50% on your needs then you should look to reduce these expenses, say by moving to a smaller property, shopping at a low-cost supermarket and getting a better deal on your utilities, such as electricity, water, gas and basic broadband.


Wants (30%) – These expenses are the ‘nice to haves’ in life. For example, high-speed internet access, meals out and takeaways, subscription TV packages, entertainment (say going to the movies or getting football tickets) as well as the gym or exercise classes. Basically, in here are all the things that you may not ‘need’ but ‘want’. Sometimes, deciding what things you need and those you only want can be quite tricky so be prepared to be hard with yourself.


Savings (20%) – Finally 20% of your income should go toward savings. This not only includes savings toward your ‘emergency fund’ but also things like extra debt repayments. You ‘need’ to pay the minimum on a credit card, so this can be subsidised by extra payments from here.

When consolidating debts is a good idea

Individual credit and personal debt are often spread out across multiple types: perhaps you have a loan, a couple of credit cards, a store card and an overdraft. This means you’ll be repaying the money you owe under different terms and APRs – and some of the interest rates on credit cards and store cards reaching up to 50% APR and even more for premium or exclusive cards.

In these circumstances, you may be considering debt consolidation – taking out a single line of credit to pay off your multiple liabilities.

Debt consolidation using a loan or a 0% balance transfer credit card can be a good idea, but bear the following in mind:

  • It should reduce your monthly repayments – Your consolidation loan should be at a lower interest rate than your existing debts. Your total interest should be lower too.
  • It should make your total repayments smaller and more manageable – If it doesn’t, then you are not gaining any benefit from consolidating your debts. There’s no point in consolidating debts if you end up paying more per month.
  • Aim to pay off your consolidated debts within the 0% interest period if using a credit card – Be aware of when the 0% interest period ends and, if necessary, swap to a new 0% balance transfer card before this runs out.


Are you retired and struggling with debt?

Debt problems can happen at any age. See our Dealing with debt in retirement guide for more info.

Struggling with uncontrolled debt can seem a hopeless task – especially if you are on a low-income or have little knowledge about how debt and personal finance work. In this case, you could try the following organisations – all of which offer specialist help and advice for dealing with debts – often this is totally free.

  • Citizens Advice – Visit its website or local CAB centre.
  • The Money Advice Service – Free and impartial advice from an official Government website.
  • The Samaritans – For anyone in crisis. Available 24 hours a day, 365 days of the year.
  • StepChange – A charity that helps people deal with debt problems and get back on track.
  • National Debtline – Call free on 0808 808 4000 or visit its website. There’s lots of free advice and tools to help.
  • Business Debtline – Allied to the National Debtline above, this provides help specifically for businesses and self-employed people.

Moneyfacts tip

Moneyfacts tip nigel woollsey

Finding out your credit score can be the first step in getting yourself back on an even financial keel. You can get your free ClearScore Credit Report via our credit check page.

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

At a glance

  • There are several debt warning signs that should serve to inform you that your use of credit is getting out of control.
  • If you are struggling with personal debt, there are strategies and organisations that can offer you help and advice.
  • Spending even more on credit is not a good way of digging yourself out of a debt hole.


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