Debt Crisis

Debt isn’t bad; bad debt is bad. Its virtually impossible to progress through life without having to borrow money. The days of ‘neither a borrower nor a lender be’ are long gone. These days many of us are forced to borrow to get a higher education or buy a house.

A debt crisis is when you can’t afford to make even the minimum repayments on all debts or meet all necessary outgoings.

Therefore even if your debts are big, if you can service them — even at the minimum level — you’re not in debt crisis and different solutions are available.

If you’re in debt crisis ...

First of all, don’t panic at the name. There is always a path through them. Starting to deal with them will make you feel better and speed up the process.

Consult the Money Saver articles to see what you can do to save more and reduce your spending.

Talking about mental health issues and money problems is often a challenge. You may feel that you don’t want to worry your family, be judged by others or disadvantage yourself at work.

But talking about the problem is a very positive and brave first step. An option might be to speak to a debt counsellor first  and then tell your partner or friends afterwards, so that you bring them solutions as well as a problem.

If you are feeling very stressed and can’t cope, contact the free debt crisis contacts mentioned in this blog, as they will be able to help and direct you to the right place.

No matter how bad it seems, there is no such thing as an unsolvable debt problem.

Three Important Things To Do

1 - Stop Borrowing

It sounds obvious, but there’s no point in trying to sort out your existing debts if you keep adding to them. The most important thing to do is to ensure you’re not borrowing more. The way to start doing this is by doing a budget  letting you see whether you spend more than you earn, so you can see where the cash is going. After that, give yourself a money makeover to see where you can cut the bills and then, if needed, you can cut back. Look up the Money Makeover article in this blog.

2 - Cut Interest Rates

The less interest you pay, the more your repayments go towards clearing the actual debt, not just servicing the interest. A balance transfer is where you get a new credit card that pays off the debts on old cards for you, so you owe the new card the money at a cheaper interest rate.

There are two main routes. The first is a 0% deal, where the card is interest free for a set period (though you pay a fee to do it), but after that the rate shoots up. Alternatively, some people could be better off going for a cheap long term deal.

3 - Pay off the highest debt rates first

List all your debts in order of interest, then focus all your spare cash on clearing the debt with the highest interest rate first, for the simple reason that it is costing you the most. That means you should pay just the minimum repayments on all other lower interest rate debts. Once the most expensive is repaid, shift focus to the next highest rate card and continue this until you’re debt free.

Mental Health Issues Can Qualify You For Disability-Related Benefits

One of the first steps to getting your finances back on track is to make sure you get the money you are entitled to. Anyone with a disability, which can include mental health problems, may be entitled to some form of payment. If you think that this applies to you, it would be a worthwhile exercise to query with other agencies. There are many people who have said they went without claiming even though they were entitled to claim, so it’s worth checking.

Debt Counselling

Trying to clear debts on your own can sometimes feel like an impossible Debt Counselling organisations have skilled advisers who can help you to sort out your money, draw up a budget and prioritise your debts. They will encourage you to prioritise your debts to protect against court action or eviction, ensuring that you pay secured debt first or utility arrears so you do not get cut off.

Be careful not to confuse this with ‘free help’. Many commercial companies say they’re free as you’re not charged directly, but you still pay somehow.

Don’t be tempted to consolidate all debts into one monthly payment using one of the debt companies that advertise on TV – you will pay more in the long run. A debt counsellor will help you deal with the court paperwork and perhaps even get the hearing delayed.

Creditors take Debt Counsellors far more seriously than they take individuals acting alone though, so speaking to a debt counsellor is usually a good idea

Work With Your Bank

Many people with mental illness are reluctant to tell their banks about their condition. However, once a lender is aware, it has to make adjustments.

It may be that you’re worried about how your information will be used. Given that any mental health info should only be recorded with the account holder’s consent and in line with the Data Protection laws, you can feel more at ease with revealing this info. Firms face serious sanctions if they use data inappropriately or don’t keep it safe.

If your condition makes you more likely to overspend or sign up for credit cards, some banks can add a note to your file. You call up the card company to let it know and they may be able to flag up your account when there are unusual transactions. This means they stop you spending more than a certain amount or contact you if they spot erratic spending.

This shouldn’t prevent your ability to get other products such as a mortgage, as excluding those with mental health problems could be a breach of equality law.

It’s crucial to discuss this with your case worker or debt counsellor. Also bear in mind that you may be asked to provide evidence of mental health problems, which can mean discussing the debt with a doctor or social worker.

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