You may never have a debt issue but if you do, we've got your back.
When you’re struggling with debt and you’re looking for solutions to solve your issue, you will find that options, methods and terms pop up that you’ve never heard of.
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 give you our opinion, take it or leave it. Remember, any decision you make is the right one, so long as it’s you that made it with all the facts intact.
We’ll help you know where to start, the mindset considerations, some technical factors to think about, types of debt, as well as some key options to understand to help ease payment pressure. Hopefully you’ll never need to use it!
Where to start
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 sort of payments and/or communicate with the creditor or debt collector or seek advice or help from someone or somewhere.
The routes may sound simple, in fact 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 route for you, you may end up with an even bigger issue than the one you started out with! Knowing your stuff really is key.
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 fine and that the company trying to recover the debt will get bored and move on. If the company chasing really wants you to pay, this tactic will likely put you in a much worse situation which could include legal action. Read our article Debt Collector Letters – Why you shouldn’t throw them away In the purple box below.
Staying calm is crucial. It is also easier said than done. Millions of people in the UK and we mean millions, struggle with debt and don’t really know what to do, leading to panic. Due to this, measures had to be put in place to help those struggling. So be rest assured there is a way out.
Know what type of debt you’re dealing with
Is it secured or unsecured? If you don’t know this, it’s important you find that out first. You should always be clear on this before entering into any credit agreement in the first place.
If it’s secured, there will be an asset attached to the debt that may be at risk. Unsecured debts (i.e., credit cards, personal loans, overdrafts etc) are lower priority than the secured so focus on unsecured debt when looking at ways to relieve your financial strain.
Is the debt in your name or shared?
If you have taken joint borrowing out, both parties are affected by any action on the debt. For example – if the monthly payment is £200 per month and you both agree to pay £100 each. If one of you pays and the other doesn’t, the creditor will class it as both of you not keeping up the agreement. You should always speak to the other party if you are struggling, any failure on your part to make payment affects both of you. Check out our Buying a property with your partner and Guarantor loan articles in the purple box below.
Now let's take a look at some possible arrangements to help with your payments.
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 ask for a payment holiday. Be sure to check that the creditor’s payment holiday terms don’t mean that when you resume payments again, you’re don’t have to pay more each month to cover the months you’ve not been paying. You may also want to make sure your credit rating will not be affected by this.
Extend the term of the agreement
Always check if you can extend the term of the agreement. What we mean by this is, 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.
We at The Real Debt Guy never recommend borrowing, but this may be an option to look at to reduce your monthly payments. To understand more about debt consolidation, read the article in the purple box below.
We have to talk about this as you may find this suggestion offered to you. This is the process of transferring your current debt to another credit facility at 0% interest or a very low interest rate which should help relieve the debt issue.
However, it’s important that you read our article about this as you there are some fundamental flaws in this process. Find it in the article in the purple box below.
When all else fails…
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 true financial education in terms of debt. The only way issues with debt can be avoided is by understanding the subject and talking about it. You should always have someone you can speak to, like a friend or a relative, if things get tough. If you don’t feel comfortable speaking to someone close to you, we have The Real Debt Guy community here to support you.