How To Deal With Your Debt Problem

Why are people in debt in the UK?

It's a sad fact but for many families their finances have been hit by increasing prices and falling incomes.

There are a number of reasons exactly why people get into debt problems. To the unassuming, the reasons may range from: simply over-spending, or not properly budgeting your finances or the correct debt management.

However the truth is about as far from this as you could imagine. Research from the charity, the Consumer Credit Counselling Service, says they aren't the main reasons. The charity, who in 2012 advised over 370,000 people who were struggling with their money worries. Nearly 25% of respondents said that their money problems has been caused by redundancy or unemployment. Most surprisingly was that just 10% of people who were surveyed claimed they were in debt as a result of not properly managing their finances.

Why people needed debt advice:

Unemployment or redundancy:    25%
Reduced Income:    23%
Illness or injury:    10%
Relationship breakdown:    10%
Poor budgeting:    10%
Increased living expenses:    7%
Irregular income:    4%
Retirement:    2%
Pregnancy or childbirth:    2%
Failed business venture:    2%

[Source: CCCS (2012)]

Top 6 debtors and the best advice for their situation

If you're currently in debt and are one the following types of people, read the advice for help in your situation.

1. Unemployed and in Debt

If you're currently out of work and looking for a job, you're not alone. Many are hoping that security of a job will end their money worries. If you've been jobless for a significant amount of time, for example, over 12 months, and have no other sufficient income, it's likely you've built up substantial debt, whether that's personal loans, student loans, or even a bank overdraft.

It can be really frustrating, especially if you have the right qualifications, but can't find work. If you're unemployed and have no means of paying your loans back, it's important to keep all your creditors informed of your situation. So if you are still trying hard to find work, explain this and also any additional pressure you're currently facing. This is so they fully understand and acknowledge your circumstances and know exactly what's going on.

If that doesn't work, e.g. the bank keeps sending demanding letters about your overdraft, or a lender employs a debt collector who says they need the money right now, stay calm and get free debt advice. A number of debt advice charities exist, who can help anyone with money worries. The advisor's have helped many people before and understand what creditors can and can't do, so you will be in a much better position in which to negotiate with them. As many of these services tend to be oversubscribed a better course of action would be to find a uk debt management plan.

2. The Single Mum

You might feel that your money worries are getting you down though, particularly as you may have no partner to share your thoughts with. Even if you aren't in a large amount of debt, it could still having a big impact.

It can be intimidating if you're all alone and there are debt collectors who come knocking on your door. If you've no money to pay them, what can you do? Having a baby it can be a scary experience, if you're constantly worried about whose going to come knocking on your door next time?

It can be a tough situation, but there could be light at the end of the dark tunnel. You can get help and advice from a free debt charity who will help you with your debts.

The alternative is to find a debt management company.

3. The Part-time Worker

You could be in a situation where you simply cannot find the right full time job. Or you could be trying to make ends meet with more than one part-time job, simple because you just can't find a full-time job which pays enough.

If you're scraping by financially, because you're overspending by for example, going out on the town, or buying too many luxuries you can't really afford, your spending habits could do with a long overdue overhaul, if only to make your bank balance look healthier.

One of the best ways for anyone who is struggling with their money is by keeping a spending diary. The first thing on your checklist to do is cut out all your unnecessary expenses. Start by listing all your monthly spending, so all items bought every week are listed. then review your list to check whether there is anything that can be cut back, so savings will be able to be made.

So you know exactly how much money you've got and how you're going to spend it, and you won't run the risk of spending any more than you really need to. It's all part of the proper debt management.

4. The Dad-to-be

Having a partner who is pregnant can be an exciting time. Waiting and preparing for the new baby's arrival, can be a busy time. If you're unemployed and your wife or girlfriend is expecting your newborn, you may be thinking how will you be able to provide for your new family.

You may even be adamant that you;re not prepared to accept any state benefits. You may just not want to rely on the government for financial support or help when you are fit and able enough to be working full time.

After all, sitting around in the local council offices waiting for benefit handouts may not be what a proud father-to-be would want to do. However, in the the short-term, you need to be realistic about your goals.

In these cases it's advisable to apply for state benefits, particularly as you have a baby on the way. Receiving tax credits as well as additional help that you're entitled to as you look for work. It will certainly help if you're stuggling and is a good way of self help debt management. Once your employed you won't need to claim for any handouts.

5. The Divorcee

If you've had a tough time recently due to a divorce, you may have found it can be a draining experience, not only emotionally, but for your bank balance. A divorce can be an expensive procedure. Adding to your worries could be the idea of having to pay for a large mortgage by yourself, repaying personal loans or other unexpected debts.

It's all too common in stressful situations like this, to live day by day, and not really living in the real world. If you've burying your head in the sand, it's exactly the wrong thing you should be doing right now.

If you're not really budgeting, you're heading for a potential financial mess in the future, or at the very least a wake up call, when you're least expecting it.

You need to start budgeting now so you're aware of what your debts are, as they're just not going to vanish into thin air. Once you know where you are, you will be able to pick the right solution. Don't ignore your debt problem. Get free debt advice and start by making a budget. Or seek the advice of specialist debt management companies.

6. The Graduate

Today with the majority of students having to take out student loans to get them through University, many are facing the prospect of student debt for the first time. If you've left university with a good degree, but still can't find a job (or the right job), you could be feeling the pinch.

You could have accumulated £1000's of student debt, overdraft debt or even taken out personal loans. Even if you're unemployed and on Jobseeker's Allowance, the bank may be pushing you to pay them back. You may be wondering if there's anything else you can do? Anything you can do to solve the problem would help.

The first step is to change your bank account, so your income is not paid into the same account as your overdraft. Also, keep your current bank informed of the situation; even extend them a small token payment, possibly a few pounds each month, or whatever you can afford. You will be able to show that you're deadly serious about paying all the debt back, but can't actually pay it all back right at this very moment in time. If you're still struggling it may be time to seek outside help from a third party like a debt management company.