Dealing with Debt

Look out for the Warning Signs

There are a few warning signs to look out for:

If you are struggling to make regular repayments
If you have debt that you can’t pinpoint what it was for. For example, you have simply spent more than your income
If you are paying debt with another source of debt. For example, using a credit card to make the minimum payment on another credit card

If any of the above sounds familiar then read on.

Admit you have a Problem. Tell someone about it

We know that having a debt problem is really stressful. It is also very scary to tell your family or friends. Try not to worry. There is always a solution.

It might not be quick or easy, but you will get through it. Opening up will help.

Why not read through our solutions to arm yourself with an action plan. When you do decide to speak to family or friends you can show them that you have a plan in place and it's under control.

The next step is to tell your Academic Supervisor. If, worst case, your university work is affected there is a record.

Get Savvy

First and foremost, you need to face up to the problem:

Always open letters about your debt

As much as we all would like to believe it, ignoring them won’t make the problem go away
Go one step further by keeping copies of any letters or papers you send or receive. You never know when you might need them in the future

Try to increase your income

Check to make sure that you are getting the full amount of student loan or grant that you are entitled to
Get a part-time job

Review your spending habits

Are you spending unnecessarily? Is there anything you can cut down on. Check out our 'How to Budget' section for all the tips and tricks you will need to save some cash
Make sure that you are paying your essential payments like rent, food, heating and electricity first. If you don’t have enough money left to make your minimum repayments on your debt you could start to think about whether another lender would offer a cheaper way to borrow

Borrowing more money is never a solution

Financial products and suppliers are always competing. Take full advantage and check whether another lender would offer a cheaper way to borrow

By reducing the amount of interest you pay, you can save money. It’s important to be very careful about this. Do a lot of research and even seek advice before going ahead with it.

Take Action

If you are unable to borrow money from another lender at a cheaper rate or you would rather not go down that road, the next step is to take action. Get in touch with your lender:

Send them a letter to let them know that:

You are having trouble meeting your minimum payments

You are contacting your creditors for all the details about your debts

You will get back to them with how much and when you can pay it off

You can also ask at this stage that they stop adding interest or charges to your account

Once you receive all the information back from your creditors you can then fill out a ‘Financial Statement’

If you have more than one debt to pay off then you should divide the total amount of money you have left over after you pay your essential payments proportionally between your creditors

To do this, just:

Make a list of all the individual debts you have and total this up

Multiply each individual debt by the total amount of money you have after all your essential payments

Divide each debt by the total amount you owe

Once you know these amounts and you are able to pay some sort of monthly payment, then you should draft a ‘Creditor Offer Letter’ where you will outline the amount that you can afford to pay every month

Make sure that you don’t stretch yourself by agreeing to pay more than you can afford though. It’s better to offer a small amount you can afford to pay regularly rather than a larger offer that you won’t be able to keep up with. Even if you can only afford £1 per month, pay it and keep the payments going for as long as you need to. You should draft a ‘Creditor Token Offer Payment’ to do this

If it turns out that you aren’t able to pay anything back for the minute but you think that you will be able to in the future, then you should draft a ‘No Offer Letter’. This will explain what your situation is - that you cannot afford to pay them anything at the minute but that you hope you will be able to again in a certain time frame

If your creditors are being difficult, don’t give up - just get in touch. Debbie, your Money Management Adviser is happy to help! In some circumstances we can get in touch with your lenders on your behalf to help resolve your situation.