Debt is one of those taboo topics that’s rarely spoken about, be that in the media or even when you’re catching up with your mates for Friday night drinks. Not all debt is bad. Some debt can even be a good thing, for example, the student loan that helped you get your degree and take that first step on the career ladder.
However, debt can quickly spiral out of control and when this happens it can have serious legal, financial, and psychological repercussions. As many Brits are currently struggling with excessive debts, it’s important to be aware of the consequences and what you can do if you’re facing debt.
In this article, we outline what you need to know about excessive debts.
What proportion of British citizens are in debt?
An article by The Guardian has revealed that in 2020, debt was a serious problem for many Brits, with the Money Advice Service estimating that 8.3 million UK citizens had excessive debt prior to the pandemic.
The nationwide problem was only exacerbated when Covid hit in March 2020 and by May 2020, 4.6 million people in the UK owed more than £6 billion in debt and arrears.
What are the consequences of excessive debts?
Having a significant amount of debt can seriously affect your credit score, which may prevent you from being able to take out a loan or obtain a mortgage. You may also find any bad credit loans for which you’re approved have a higher interest rate and stricter conditions than many other loans available.
A low credit score may also affect the amount you pay for services such as car or home insurance. Having excessive debts brings emotional stress as well as financial strain. You’ll be chased by debt collectors and in some cases, you may be taken to court.
How can debt be overcome?
Overcoming debt can take time, so don’t expect it to happen overnight. Start by assessing the debts you have and determining which require urgent action. Urgent debts include anything related to your housing, council tax or mortgage, as well as court fines and income tax arrears.
It’s worth checking if you must pay a debt, as you may not be responsible for paying all the debts you have. You’ll be liable for any debts related to a bill you legally have to pay, such as council tax and any debts related to a contract you signed agreeing to make payments, such as a rental contract.
Paying off your debts may require you to make some changes to supplement your income. This could mean getting a higher paying job, taking on part-time work or simply cutting back on unnecessary expenditure while you handle your debts.