With less than a month to go until Christmas, the festive season has commenced – we’ve had Black Friday, Cyber Monday and Christmas songs are being played on a continuous loop on various radio stations. We all know at least one person that embodies the spirit of Christmas and has their decorations unpacked and their tree shining brightly in the corner of their living room.
In previous years we’ve discussed tips to help save money at this time of year. However, this doesn’t help, unless we know the underlying reasons people get into debt for a festive holiday. It’s become a time to overspend and deal with the debt in the New Year.
In a recent survey for the Parentdex report, it was identified that a third of parents still have debt from last year’s Christmas spending. Parent’s spend on average £259 on gifts for children and in total, parents expect to spend over £800 more between Christmas and New Year than they normally would. The survey found that mothers are better at saving money than fathers, however overall a third of parents will turn to credit cards to meet additional costs.
How does debt impact on your Christmas?
We asked people in debt to summarise their feelings about Christmas and the majority said they would cancel the holiday. Debt leaves people feeling unsure about their future, but most felt they were obligated to make a financial commitment for their family and children.
The obligations for families at Christmas can result in overspending to meet expectations and parents often don’t want their children to experience a Christmas “going-without”. It’s a very natural feeling, but it can result in long term financial problems.
Debt is rarely, from our experience at Debt Support Trust, a short expensive spending spree. A debt problem occurs gradually – the average person seeks advice after accruing debt for seven years – followed by a period of worrying about the debt, before contacting our charity.
Dealing with debt before Christmas
If you want to manage your debt before Christmas and understand which debt solutions you would be applicable for before the New Year then you can speak to a debt advisor in confidence at Debt Support Trust.
We’ll assess your circumstances and explain which debt solutions you would be suitable for. We can also offer some budgeting advice if appropriate.
Speak to a friendly debt advisor on 0800 085 0226 between Monday to Friday 8am to 7pm. Alternatively, why not complete our online debt test and receive your result with recommendations for debt solutions?
As part of a UK-wide investigation, the provider researched the cost of nursery fees around Britain, assessing average childcare bills against mortgage payments and salaries in 13 cities. The results show that parents are paying a significant portion of their earnings towards childcare – in some cases up to 55% of one person’s salary.
Parents in Glasgow are paying the least for childcare, with a full-time place for a child under two coming in at an average of £799 a month. This is followed by Liverpool at an average of £860 per month and Plymouth at £884. London is the most expensive, with average fees an eye-watering £1,383 per month, almost £600 dearer than Glasgow. Meanwhile, average childcare fees in Bristol tot up to £1,142 and Southampton to £1,050 making them the second and third most expensive cities, the research found.
The investigation also found that a parent could be spending between 41% and 56% of their net wages covering childcare costs, leaving them an average of £1117 a month* to cover mortgage or rent, council tax and household bills, groceries, transport and other costs associated with raising a child.
It means that for couples who are both going out to work, more than a quarter of their joint income might need to be set aside each month for childcare. For single parents, more than half of their earnings could be lost before they’ve even begun to pay for necessities and other bills.
The breakdown: Where do parents pay the most childcare in relation to their salary?
|Ranking||Area||Average monthly childcare cost||Childcare as a % of one average salary|
In 6 of the 13 cities – Manchester, Birmingham, Plymouth, Liverpool, Nottingham and Glasgow – monthly childcare bills were found to be higher than average mortgage payments. The price of an average house in each city** was used to calculate monthly payments, based on a 25-year term, with 95% loan-to-value.***
And in London, Cambridge, Southampton, Bristol and Newcastle, an average worker would not earn enough to cover both full-time nursery costs for one child and average mortgage payments. This means families, particularly those with single parents, could be at risk of falling into debt if they want to continue with their careers past parenthood, or else be forced to stay at home because it is not financially viable.
Mortgage + childcare – how much is left?
|Ranking||City||Average monthly take home salary||Average monthly mortgage payment||Salary left after childcare and mortgage costs paid|
And for those who want to expand their family, putting two children into full-time nursery would mean a parent on an average salary would have, at best, £400 a month after paying for childcare bills.
Two children in childcare – the costs
|Ranking||City||Monthly childcare for two children||Wages left after paying for childcare for two children|
Scott Cargill, UK CEO of Admiral Loans, said: “Our research shows the cost of childcare can be a huge burden on new families. Parents who have taken maternity or paternity leave may already be under financial pressure after being on a lower income during their time out of the workplace and may be squeezed even more when the cost of childcare kicks in.
“New parents have a lot of additional costs to consider. For families already on a tight budget, anything that pushes their spending further, such as holidays, Christmas or birthdays, can tempt people into looking for ways to ease the strain.
“Payday and short-term loans that alleviate immediate financial stress can seem like a quick fix, but can make life more difficult in the long term. Parents considering taking out a loan should think carefully about all the options available to them and even whether a loan is right for their financial circumstances. Being clear on the interest rates and ensuring loan repayments are sustainable, is key to ensuring hard-working families don’t fall into a financial trap they can’t escape from.”
Stuart Carmichael, of the Debt Support Trust said: “Many families face a financial dilemma after a child is born and it’s a problem which needs to be addressed. While efforts have been made to make it more affordable for parents to return to work after the birth of a child, for low income families, the financial benefit can be very limited.
“We are concerned that more people could be turning to high interest, short-term loans to bridge financial gaps, which are a temporary solution at best and could lead to additional stress and worry further down the line.
“For those struggling with the costs of raising a family, there is help out there and we would urge people to get in touch with us for advice before they feel they have to turn to desperate measures, which may make the situation worse in the long term.”
Admiral Loans have developed a cost of childcare tool to help families plan ahead: www.admiral.com/childcare
Tips to help ease the stress of the cost of childcare:
- · Consider childcare voucher schemes – many employers offer this and it can reduce the cost of childcare, with the bill coming directly out of your salary. The government has also launched tax-free childcare for children under 4.
- · Ask family to help with childcare – an increasing number of grandparents are looking after their grandchildren to help ease the burden of childcare costs. They may also be able to get contributions towards their National Insurance.
- · Do your research – looking into other childcare options, such as a nanny shared between a group of you, or a childminder, might provide cheaper options. Ultimately it needs to be a place you are comfortable leaving your child, but make sure you factor in all costs so you can make an informed choice.
- · If you are concerned about getting charged late pick-up fees from nursery, speak to your employer before returning to work to see if flexible hours would be an option. You have the right, by law, to ask for this.
- · Discuss budgets before planning a family so there are no unexpected surprises that you haven’t planned for.
- · Avoid taking on extra debt that you can’t keep up repayments on. It can be easy to go for quick fixes, but ultimately, they could put you under more pressure further down the line. Think about whether you can afford the repayments and whether it is the most cost-effective solution.
- · Seek advice. Charities such as the Debt Support Trust offer practical solutions to people who are feeling the pinch.
Debt Support Trust is nearing its 7th birthday and it’s left us in a reflective mood. From our research we found out that people often spend seven years accruing debt before realising they have a problem and need some advice. In our last seven years we’ve helped advise on millions of pounds worth of debt and supported tens of thousands of people to become debt free.
The advice we provide at the charity is intended to be holistic – we look at every option and provide the positives and negatives of each solution based on your unique personal and financial situation.
We aim to please
At the charity we feel privileged to help people at a difficult period in their life. Nobody ever wants to be in debt as it’s not a pleasant feeling. Consequently, we take our responsibility seriously to ensure that every debt solution is explained in detail and help you with advice to become debt free once again.
We received a lovely email today which reminds us that the advice and support we offer is valuable and that while we may never speak to the people we’ve assisted ever again, that at that moment in their life we were able to offer guidance and comfort. You can read the email below:
I am now only a couple of steps away from the end now.
I’ve been up late cleaning up my affairs (on a Friday night, party on!) and thought I’d best write to you to express my most sincere gratitude to yourself.
I’ve been ignoring my debt for years, but when I finally decided to bite the bullet, I could not have hoped for somebody like you to answer the call. I knew that I would have to pay the debt back somehow – that I could not ignore as it wasn’t technically my money to spend, but I feared that the pay-back was going to be dreadful.
What you’ve done was above and beyond the call of duty. I cannot sing your praises enough. You took an almighty weight off my shoulder and got me on the right track.
I have spent many, many years answering telephone calls in my line of work, and the service you provided was exemplary.
I do hope that management get sight of this email, it really is individuals like you that make all the difference in today’s day and age.
It seems like Christmas comes around faster each year with last year’s celebrations only just passed, but unbelievably we are only 15 weeks away from Christmas again. For many people, that means just 3 – 4 monthly wages before the festivities commence. Instead of focussing on the negative elements of Christmas, we recommend some quick fixes so you can be prepared and enjoy the Christmas period.
If the thought of Christmas sends chills down your spine, then read on as there are some quick tips to help prepare you for the festivities.
Top Tips to Afford Christmas
Previous research we had conducted at Debt Support Trust found that a large percentage of people would fail to pay off their Christmas debt by the end of the following year, with most people feeling obligated to spend more than they could afford.
Here are some of our tips to plan ahead and enjoy the Christmas period:
- Plan ahead: If you are purchasing gifts for family and friends then planning ahead is crucial. You can hunt out the best deals on the high street and online, with time for items to be delivered.
- Budget: It’s easy to say but spending within limits is the best way to enjoy Christmas. For many, the best part about Christmas isn’t the gifts but spending time with family and friends.
- Secret Santa: Remember all those presents you received and thought “I’ll never use this”? Well, with secret santa you only receive and give one present to your nearest and dearest. You won’t receive presents that you’re unlikely to use, you don’t have to spend excessive amounts of time and money on gifts meaning you’re free to enjoy the holiday.
- Honesty: If money is an issue then most families won’t want their relatives to get into debt to purchase gifts as it’s often the thought that counts. As a result, honestly tell your family that you’re not in a position to spend too much at Christmas and stick to your budget.
Can these financial tips work?
These tips are great in principle, but we’re not naive to think that it’s that simple. For people contacting Debt Support Trust, often month to month living is hard enough without an expensive holiday like Christmas to contend with too. This means saving and budgeting monthly is next to impossible when you have the standard monthly expenditures like rent / mortgage, council tax and food along with existing credit commitments.
If you’re in this situation then perhaps what you need is a pre-Christmas financial assessment. We can help you look at your financial situation and recommend ways we could make things easier. If you’re credit cards, loans and overdraft debts mean you’re struggling month to month then there could be a number of ways you can resolve these.
Conversations with our debt advice advisors are confidential and better yet, free. You can call us on 0800 085 0226 for some advice on your debts and finances.
Almost 20% of people contacting Debt Support Trust in the last month tried to get a consolidation loan first, however their loan applications were rejected.
When you apply for a loan often a footprint is left on your credit file to show that an application has been made. When you’re rejected then apply elsewhere this footprint is visible and can make being accepted even tougher.
In society, credit is considered to be good (typically) and debt bad. Which is why you may decide the consolidation loan route is the best option. So, what are the next steps if you are rejected for a loan?
Consolidate Debts with One Loan
Before the credit crunch, consolidation loans were relatively easy to access and certainly easier to be accepted for than in today’s financial climate. For many people, their plan to consolidate debt is a good one, especially when they’re paying high interest on existing debts.
Some financial institutions will advertise rates for consolidating debts into an easily repayable loan, but it’s often not as straight forward to be accepted. The criteria, often affordability, is the one area which means people are rejected for a loan.
Steven from Manchester told us “I have 6 debts totalling £14,000 and the interest rates are high. I’m paying over £700 each month and I don’t see the debts going down. I applied for a loan which would have made my payments more affordable each month and I would have been debt free in 4 years, but I was rejected”.
It’s frustrating being rejected for a loan, but often it’s the lenders policies which determine if they are willing to take the risk and lend. At Debt Support Trust we’re certainly helping more people unable to obtain a loan to deal with their problematic debts.
Loan Rejecting: What’s Next?
After being rejected for a loan there are a number of things you can do. The first is to check your credit file. Is there any inaccurate information on your credit file which could improve your chances of being accepted? You could also ask the lender why you were rejected.
Is another loan the correct answer and would it be affordable to repay even in the toughest months, like birthdays and Christmas? Often another form of credit prolongs a debt problem but doesn’t actually resolve the issue.
If you’re struggling with debt then why not complete a statement of affairs with Debt Support Trust? This is where we look at your income, expenditure, disposable income, assets and level of debt. You’ll then be able to see how much you can realistically afford to repay towards unsecured debts each month. Our advisers will offer you every scenario, along with the positives and negatives, to resolve the debts so that you’re empowered to make an informed decision about your financial future.
A loan to consolidate debts could be your best option or your unsecured debts may best be rectified with a debt solution. Speaking to a debt adviser at Debt Support Trust will help you better grasp your debts and understand which options you have.
Do you know what surprised me most when I started paying off my rather large amount of debt?
Most of what I read – websites, blogs and books – abounded in truisms like ‘don’t spend more than you earn’, minute technicalities of saving and/or righteous judgement. Some of that was useful, some of it was not worth more than a second’s look. What I read, offered information but not the wisdom and understanding that I needed to pay off my debt.
The wisdom necessary to pay off our debt, and stay debt free, I had to figure out. Here I’d share 7 important things about debt that personal finance experts won’t tell you.
Before we move on, let me tell you a bit about me.
I’m Maria; I blog on personal finance and I’m professor at two universities. I have written two PhD theses and have initiated in research many generations of students. Smart, uh?
I also had £100,000 of consumer debt at the beginning of 2010. You see, you can get yourself in debt irrespective of education, background, occupation, gender…Shall, I continue?
The key point is that anyone can get themselves in debt. As with many things in life, getting in debt is not what matters; what you do next is what counts.
What did I do, you may ask?
I got fed up and I got determined. I learned a lot of what there is to know about money: about how to make it, keep it, spend it and invest it. This all paid off. Three years later, at the beginning of 2013, we had paid off all our debt. Now we have serious savings and investments.
The 7 important things about debt I share here, didn’t come from bookish learning: they were suffered and tested through experience.
#1. Having debt is like stealing from your future self
Some people tell me that they have debt but they are not bothered about paying it off. Some people were also very negative when the news that I paid off £100,000 worth of consumer debt in three years; some muttered that I should have gone bankrupt.
You know what?
These people must realise that staying in debt is like stealing from your future self. Why would you want to do that?
#2. Paying off your debt is very empowering
After you’ve just realised how much debt you have, the way to debt freedom looks like a climb to the summit of Everest: long, cold, hard and very daunting.
Don’t feel disheartened. Just start paying your debt off. Very soon you’ll see results and this is so empowering.
When we paid off over £70,000 in two years, I started feeling like Rambo: nothing seemed impossible and sky was the limit.
And you know what? I hustled like a pro! You can feel my elation in my announcement that we are debt free.
#3. Not everyone can pay off their debt
Personal finance experts, particularly bloggers, will try to motivate you by telling you that everyone can pay off their debt.
This is not true. To decide whether you can pay off your debt, use The Money Principle ‘debt repayment coefficient’ or DRC. This is:
DRC = (Annual Pay After Tax – Annual Survival Budget)/total debt
If your DRC is larger than 0.18 you can’t pay off your debt and need to seek professional help. (I’m assuming you know or can work out your Annual Survival Budget but let me give you a hint: this is the spending that you need for your survival and not much less. Still, your survival budget can be surprisingly large.)
I’m not a spoil sport and I’m not here to burst your bubble. I’ll motivate you by saying that if you find your DRC is high, you can start learning how to make more money. It’s all splendid fun.
#4. Most people are in debt because they don’t earn enough
This is certainly something you won’t hear often from personal finance bloggers. They’d rather tell you how to save more and be frugal to the extreme.
The problem with frugality is that it can be very dangerous when extreme. Yes, you can cut your food budget but this often means inadequate nutrition and limited capacity to do much else than make designs on how to be more frugal. Yes, our minds are limited as well.
Yet, when you look at statistics the median gross household income in the UK (2 adults) is approximately £22,000 (this is before tax) and the basic cost of living per person is approximately £15,000 per person. Can you see the problem? It is not surprising that 60% of the people in the UK who live below the poverty line work, is it?
Make sure that you earn enough before you start making plans to pay off your debt.
#5. Habits are the key to debt
When talking about debt we usually talk about money. So, people tell you that you are in debt because you spend more than you earn.
This is technically correct but rather misguided. You are in debt because you:
- Don’t balance your current account regularly;
- Don’t control your spending;
- Don’t spend mindfully;
- Buy quantity rather than quality; etc.
To put it bluntly, you are in debt because of your habits. To get out of debt, and to stay debt free, you need to change your habits.
#6. To pay off your debt you need focus not money
“Ah, Maria, but of course I need money to pay off my debt.”
Money is secondary, friends. You can spend your money on any number of things. To spend it on paying off your debt you should develop the focus of a hunter. You must stalk your debt, chase it and hit it until it is all gone. All of it!
You wish to know what I mean?
When we were paying off our debt, the smallest payment we made was slightly over £4. This, my friends, is the focus of hunting tiger.
#7. Having debt makes you very vulnerable
Most people would rather judge when they talk about debt. I’ve always been practical (and I never allowed anyone to judge me).
I wasn’t ashamed of having debt – after all, this is the norm and our capitalist societies thrive on debt. No, what really made me mad, so mad that I didn’t stop until the last penny was paid off, was that having debt made me very vulnerable.
The bank could have taken our house.
My employer had a big trump card over me: I needed the job.
My choices were severely limited.
If I were to encourage one emotion when dealing with debt it would be the craving for independence and security. Because they feel great and you cannot have them when you have debt.
Becoming debt free is the best thing I ever did apart from giving birth to my son. It wasn’t easy. It took determination, ingenuity, extremely hard work, learning new skills and repeatedly leaving the safety of comfort zone.
I don’t regret a second of it. Paying off my debt is one of the most empowering periods of my life. It taught me that I can face anything in life and can not only survive but thrive. It taught me to adapt, learn and grow.
Best of all, it was so worth it. People are right when they say that the ones who earn interest sleep better than the ones who pay it.
How has your sleep been?
British consumers are worried about the effects Brexit could have on their personal finances, including their level of debt.
A new survey by Mintel has found 83% of Brits believe prices of goods and services will increase due to the UK leaving the European Union.
Almost half of those surveyed (46%) said they believe the UK leaving the EU will have a negative impact on the cost of living.
37% said they are worried about their level of debt, while 48% are concerned about how they will manage to pay bills.
Jack Duckett, at Mintel, said: “Mintel research underlines particular concern about the rising cost of in-home food, and inflation is undoubtedly going to squeeze household budgets.
Although, there was a positive result from the poll, 31% of people believe Brexit will have a negative impact on the economy, which is down from 39% in July last year.
Dealing with Debt Post Brexit
There’s still a lot to be negotiated between the UK and European Union, making it difficult to understand the full effect Brexit will have on the UK economy.
Debt solutions will likely remain the same, or at least not change due to Brexit, because these are already regulated and operated within the UK.
Whether Brexit has a negative impact on personal finances or not it’s important people who are struggling financially seek advice.
Dealing with Debt Before Brexit
Anyone who is concerned about their finances in a post-Brexit UK should seek immediate debt advice before the transition is finalised.
There is around two years to go before the UK finally leaves the EU and this time can be used to deal with debts and prepare household finances.
If you or anyone you know requires debt advice they can speak to Debt Support Trust on 0800 085 0226.
Debt problems affect everyone differently. For some people it’s a debilitating problem which results in lack of sleep, increased anxiety and a fear to open the post or answer the telephone. But, for other people, it’s much more easily managed.
One of the reasons debt affects people differently is that debt problems can vary – a problem for one person may be easily resolved by another.
At Debt Support Trust, our charity helps people around the UK that want to resolve their worrying debt issues. We listen and provide advice in complete confidence. Our goal is to give you every option that you’re applicable for and we can explain why some debt solutions may not be suitable for you.
Tailored Advice is Vital
Advice which is specific to your situation is imperative. The wrong advice and you can find that your debt solution is negatively impacting on your future, instead of making the problem better.
We spoke to somebody recently about their husband’s bankruptcy. They were advised by a friend to go bankrupt – because that’s the route they took and it was the best decision of their life.
For some people, bankruptcy is an excellent debt solution which will enable them to rectify their troublesome debts while continuing to live. However, in this instance it was the wrong advice from their friend.
The couple owned a property with over £100,000 worth of equity and the couple were both in employment with an excellent monthly salary. In bankruptcy, you are obligated to pay what you can reasonably afford in an income payment order and any assets will be realised for the benefit of creditors. In short, the couple would have to raise money from their house to pay a fair percentage to the bankruptcy.
The original debt was £27,000. With the bankruptcy fees and charges the debt rose significantly. In circumstances like this we can provide advice on how to negotiate with your trustee, however, had we spoken to the couple beforehand we would never have recommended bankruptcy.
This highlights the need for tailored debt advice specific to your personal and financial situation. We can help with debt problems by providing confidential advice and in this set of circumstances we would have recommended a number of alternative options, which were not bankruptcy.
Getting Help With Debt
Our research from when we speak to people in debt suggests people spend an average of one year worrying about debt before taking action and seeking advice.
“The hardest part is talking about the problem. My friends and family don’t know about my financial problems, but I know I need help”.
Our debt advice charity is on hand to listen and advise you, in confidence, on the best routes to resolve your debt problems. We’ll provide you with every option, along with the positives and negatives, so you are empowered to make the decision.
Debt Support Trust helps people around the UK between Monday – Friday 8am – 7pm or you can get debt help via our debt analyser 24 hours a day, seven days a week.
It’s often perceived that credit is good and debt is bad. However, every year good credit goes bad for thousands of people. Borrowing money can help you achieve your personal objectives, such as home improvements, but we explore some of the signs that you could have a debt problem because of troublesome credit.
For most people that get into debt they tell us “I wish I had something to show for the debt”. The reason most people don’t have a luxury house, designer clothes or have travelled the world on credit is because that rarely happens.
Credit is frequently used as a “buy now and pay it later” financial service. But, along the way, it’s not uncommon for people to struggle with their once affordable credit commitments.
Reasons For Debt Problems
There are numerous reasons why a person can find themselves struggling to manage their credit commitments. Nobody ever wants to be in debt, so why does it happen?
- Loss of Income: During a period of unemployment many people turn to a line of credit to survive. If the unemployment continues for longer than anticipated then the debts continue to mount.
- Separation / Divorce: A change in circumstances, such as separation or divorce, can create a debt problem. The cost of living in a couple is often more affordable as the bills are split. This is particularly true when the debt existed while in the relationship and you’re trying to repay the money borrowed at the same time as managing your enhanced expenditure.
- Consistent overspending: The intent when borrowing money is always to repay it. However, debt can grow and become unmanageable.
- Unexpected repayments: Many benefits, among other debts, can be overpaid in error and repaying these can be difficult. Typically, repayment plans can be setup so the debt can be repaid, but if the repayment period is too long a debt solution may be required.
Debt Problem: What are the signs?
On average, it takes 7 years of accruing debt and a year of struggling to make the monthly payments, before it becomes impossible and people seek debt help. There are signs that you may be struggling with your debt and these are our top 5:
- Minimum payments: Making minimal payments towards debts because that’s all you can afford is a sign you need debt help.
- Feeling of dread: When the bills arrive through the door do you fear opening them, so they mount in a corner? Many people in debt feel unable to open bills when they know their debt has become unmanageable.
- Credit to survive: Continually using credit to pay for food or living costs because your salary and income is used to pay debt is a sign you could need debt advice.
- Consistently balance transferring: Using the balance transfer with interest free period features of a credit card is an excellent route to repay debt, without having to pay interest. However, if you’re balance transferring and continuing to make the minimum payments then the debt isn’t going anywhere.
- Family and Friends: If you’ve stopped socialising with friends and arguments with family are increasing, this could be a sign of debt and money worries.
- At Night: Is your debt often the last thing you think about before bed and the first thing you think about in the morning?
How to Deal with Debt?
Once you know you have a debt problem you can always speak to a debt advice charity like Debt Support Trust. However, if you don’t feel ready to talk to anybody about your money worries you can complete a statement of affairs.
Your statement of affairs considers your monthly income and then what your expenditure is for essential items like food, mortgage/ rent, council tax and travel.
In a separate column, list the companies you owe money to and a rough balance. If you have any assets like stocks, shares, bonds or equity in your house you should list these under assets.
Once you’ve completed this process you will know how much your cost of living is each month and how much money you have available to repay towards debts. You can speak to a debt advisor at Debt Support Trust who will be able to talk you through all of your options.
Alternatively, you can complete the debt analyser online which summarises your income, expenditure, assets and debts.
The impact of personal debt on families is unmeasurable. How do we place a value on the resulting stress and fear debt problems create? Whether it’s debt collectors at the door or families arguing due to money worries, can we comprehensively measure the implications of troublesome debt? The Children’s Society is calling on the Government to provide legal protection to help families with problem debts.
The proposal would include a 12 month moratorium to help families in debt organise their finances without the pressure from creditors and with payments and interest frozen.
Interest Free Period – The Research
The Children’s Society research suggests that 620,000 families are spending more money on overdue bills than on food. 38% of families are borrowing money in order to pay for essential living costs like food.
Our own research at Debt Support Trust suggests that people typically fall into the debt trap because of unforeseen circumstances. For example, separation or divorce, loss of income or a change in circumstances are typical reasons for debt problems. A debt which was once manageable can quickly become a repayment issue.
The proposed changes recommended by The Children’s Society could help protect children from the societal effects debt can cause.
Managing Debt – The Effects
Debt problems often result in quick decisions. We found that people spend roughly seven years accruing debt, a year worrying about it before they make an immediate decision on how to deal with the debt.
If people had a period of protection from their creditors to help make an informed decision on their financial future, could that help guide more people towards the correct debt solution? Would fewer people enter bankruptcy because they realised they could potentially repay the debt?
In our experience, very few people want to enter a debt solution. In truth, it’s the complete opposite- they wish they never had to pick up the phone and make the telephone call. If 12 month moratorium periods were submitted by debt advice charities it would encourage people to seek advice and protection, so they could consider their options without the threat of creditor action.
In any event, the safety and security for children would be enhanced. Parents would be able to budget with a charity advisor and receive necessary advice on their finances. Barnardo’s estimates there are 3.7 million children living in poverty in the UK. Positive action must be taken to alleviate this social and financial crisis and it starts with changes within the Government.