There are several signs which could mean you are heading for trouble. These include:
- borrowing to meet the repayments on a loan or credit card
- only making the minimum payment on your credit card each month
- taking on new borrowing to pay off old debts
- falling behind with payments on loans
- using money earmarked for other essentials, such as food or your annual tax bill, to pay off debts.
If you're having difficulty paying your bills check if you have any other resources which you can use. This could be savings or money from an emergency fund. Another option is to borrow money from relatives to help tide you over.
If you're unable to find any other resources speak to your lender. You may be able to come to some arrangement with them to reduce or take a holiday from your repayments until your finances improve.
Your lender will probably want some proof that you are genuinely having difficulty rather than just spending your money elsewhere. A good way to show this is to draw up a budget of your monthly income and outgoings.
You can use your budget to work out how much you can afford to pay your creditors each month as well as using it to negotiate with them.
If you would like further help on how to approach and negotiate with your creditors there are several organisations which offer free, independent advice. These organisations are listed below.
- Citizens Advice Bureau - see local phone book for your nearest branch. For England and Wales www.citizensadvice.org.uk, for Northern Ireland www.citizensadvice.co.uk and for Scotland www.cas.org.uk
- National Debtline on 0800 808 4000 and at www.nationaldebtline.co.uk
- StepChange debt charity at www.stepchange.org and 0800 138 1111, formerly Consumer Credit Counselling Service
- PayPlan at www.payplan.com and 0800 280 2816
- Money Advice Scotland at 0141 572 0237 and www.moneyadvicescotland.org.uk
- Advice NI (Northern Ireland) at www.adviceni.net
Debt management companies offer a similar service. While the advice they offer is often free you have to pay for them to negotiate with your creditors. These organisations won't do more for you than the organisations listed above and will cost you money you could otherwise use to reduce your debts.