Dealing with Debt

If you have a problem with debt, it’s important not to panic but don’t ignore it either - We can provide you with advice on your next steps.

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DEALING WITH DEBT

 

Many people are in debt, which basically means that they owe money.  This can happen for many reasons depending on people’s individual circumstances, but essentially it is because their income is less than the amount they spend.  Sometimes this is because people spend money on non essential items, but often it is because their income is too low to pay for all of their essential costs, like rent, food and bills.

People can also get into debt because they forget to notify organisations such as Student Finance England or welfare benefit agencies of a relevant change in their circumstances, which means they might be paid more money than they should be. Once the organisation realises it has overpaid someone, it usually takes the money back, often without warning, which can lead to the person falling into debt.

Personal finances and mental health often have a strong impact on each other. If you are struggling to keep control of your money, you may find that your mental health is affected. Likewise, if you find that you cannot cope with your feelings or behaviour, you may find that you get into financial difficulties.

The mental health charity MIND has some useful web pages which can help you to understand more about how mental health issues can affect your finances, as well providing helpful tips for taking control of your money.

The Money Saving Expert website also has a free downloadable guide to dealing with debt for people with a mental health condition. This guide has been written to help people with mental health conditions understand how this can impact on their financial situation, and also how being in debt can lead to mental health issues. The guide explains some practical steps that you can take to improve your financial situation.

You are also advised to get advice and support from the Advice Service who have licensed Money Advisers who can help you deal with your debts by providing you with options and assisting you to negotiate with your creditors. (See ‘How can an adviser help me’)

Rent

Rent is the money you pay to your landlord in return for living in their property. If all or part of your rent is not paid on the date it is due, the debt owed to your landlord is know as ‘rent arrears’. If your rent includes other charges such as water, gas and/or electricity, all of these charges will also be treated as rent arrears.

Some tenancy agreements have clauses in them that allow landlords to charge you interest for each day that you are in rent arrears and landlords can take you to court to evict you from the property and get their money back if you ignore the arrears you owe.

If you are taken to court this can affect your credit rating and future ability to rent, get a mortgage, take out loans and so it is important that you speak to your landlord to discuss repayment options as soon as possible.

The Advice Service has licensed Money Advisers who can assist you by exploring your options and helping you to negotiate with your landlord.

Short term loans

Payday loans are short term loans, usually lent for a period of a few days or weeks. They are a very expensive way to borrow. They can be easy to obtain, which makes them risky, as you might take one out without properly considering the consequences i.e. whether you will be able to afford to repay it. Payday loans tend to have a fixed fee attached to them, rather than an interest rate (as a loan or a credit card would have) so the fee is very high compared to the amount you have actually borrowed. Taking one out can make your situation worse. You can find out more on the Money Advice Service website.

Payday loans should be avoided if at all possible, and you certainly shouldn’t take out a payday loan if you are not 100% sure that you will be able to repay it on the due date. If you cannot make the repayment, the fee you incur will increase substantially. Many people end up taking more payday loans to repay existing payday loans, and get into an unmanageable spiral of debt, which negatively affects their credit rating and their ability to obtain credit in the future.

If you believe you were mis-sold a payday loan, you may be able to reclaim the amount you paid in interest, fees and charges – this is explained on the Money Saving Expert website.

Another form of short term borrowing is from Loan Sharks. These should be avoided as they are illegal unlicensed lending companies, who often go door to door to try and persuade people to borrow money from them. They are known to use illegal methods to ensure that customers repay their debts, including violence. Find out more, including how to spot a loan shark, on the Money Advice Service website. If you know of loan sharks, you can report them on 0300 555 2222, or text LOAN SHARK and the lender’s details to 07860 022 116 or email reportaloanshark@stoploansharks.gov.uk.

If you are running out of money, contact the Advice Service. Our advisers will help you to explore all of the options available to you for increasing your income rather than taking out short term loans which you may be unable to repay.

If you owe short term loans and you cannot manage the repayments, contact the Advice Service. We have licensed Money Advisers who can go through your options and assist you to negotiate with your creditors.

Longer term loans

This type of borrowing includes credit cards, store cards, and non student specific bank loans. These usually have high interest rates and are repayable on a monthly basis while you are still a student, therefore it is likely that you will struggle to afford repayments.  If you already have debts on which you cannot afford the monthly repayments, you need to take action – see below.

If you are running out of money, contact the Advice Service. Our advisers will help you to explore all of the options available to you for increasing your income, as an alternative to you borrowing money which you may be unable to repay.

Student Finance and student specific loans

It is a reality that most students will need to borrow money to fund their studies.  Some people think that all debt is “bad”, but in fact some types of debt are preferable to others.

As a student you can usually borrow money specifically to fund your studies at preferable interest rates. Government maintenance loans to fund undergraduate study only become repayable after you have completed your course and when you are earning a minimum amount of money so this is a debt which you won’t have to worry about too much while you are studying. There is also a government Masters Loans Scheme and a Doctoral Loans scheme where repayments start on completion of your course only when you are earning a minimum amount of money.

An interest free overdraft on a student bank account can be another useful source of borrowing.

Tuition fee debts

If you owe money to the University of Lincoln for your tuition fees and cannot pay what you owe by the required deadline, you will usually not be able to enrol onto the the next year of your course or complete your course and receive your degree unless there are other options available to you, such as interrupting your studies. For more advice please contact the Advice Service who can discuss all of the options available to you.

Other debts to the University

If you can pay your tuition fees by the deadline, but you owe other money to the University such as University accommodation fees, you will still be able to progress your studies and graduate with your award. However you will still owe the debt to the University and should contact the Finance department to discuss repayment options otherwise further action can be taken in the form of your debt being passed to debt collectors and court action to recover the debt.

Contact the Advice Service if you need to speak to an adviser about managing your debts to the University.

 

If you have debts which you are unable to manage, for example credit card repayments which you cannot afford, or rent arrears or council tax arrears, contact the Advice Service to make an appointment with a licensed Money Adviser.  If you ignore these debts they can very quickly get out of control.  If you are in rent arrears you could lose your home. If you have council tax arrears, the local authority could send enforcement agents (previously known as bailiffs) to visit your home and remove your possessions.  If you miss repayments on credit cards, or pay late, charges are often added to your debt, and this higher balance will increase the amount of interest you pay.  Defaulting on repayment agreements can affect your credit rating, which would make it harder for you to get credit in the future, such as a mortgage.

Do not ignore unmanageable debts: the problem will not just go away. Contact the Advice Service as early as possible, it is never too late to seek advice and something can usually be done to improve your situation. We explain below how the Advice Service can help. If you prefer, you can choose to contact the organisation you owe money to yourself, however, many creditors often take their customers more seriously when they have contacted a specialist for debt advice.

If you have a mental health condition, also see the section above on ‘Debt and mental health’.

You can book a one to one confidential telephone appointment to see a Money Adviser. Sometimes people feel embarrassed about being in debt, but your Adviser will be completely non judgemental. They will firstly check that you are getting all of the income you are eligible for, for example there may be funding you didn’t know about. They will then advise you on the options available to you for dealing with your debt. Sometimes this may be with an outside agency depending on the best option for you.

A list of not for profit debt advice agencies is provided on the Money Saving Expert website who you can contact  directly yourself.

You might feel that a creditor is treating you unfairly and using inappropriate methods to try and get you to repay the debt. While creditors or their agents are allowed to take ‘reasonable’ action to try and recover a debt, it is a criminal offence to harass people in debt.

The National Debtline website explains what constitutes harrassment and how to deal with it.

You can also read more about what action creditors can take, and what they aren’t allowed to do, on the Money Aware website.

An agreement between the Government and Credit Services Association, the body that represents debt collecting agents (see its Code of Practice), gives new powers that guarantee debt collectors won’t contact you for at least 30 days, provided you’ve sought debt help or can show you are trying to repay your debts using a self-help tool. So contacting the Advice Service or a specialist debt advice agency is helpful as they can notify the debt collectors and give you 30 days of no contact during which time you can take action to resolve your debts.

You can read about how your credit score is assessed, and how to boost your credit rating, on the Money Saving Expert website.

There is information about dealing with bailiffs on the National Debtline website.

There is also information about bailiffs and what to do if you are visited by them on the Citizens Advice website.

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