January is often the hardest month for millions of people. You got paid early in December so the money has to last longer, but then the credit card and catalogue bills arrive with that extra Xmas spending on them.
So if you can’t pay all your bills and debts this month, what are your options?
Here is a practical list – starting with some things not to do, as they will make your life harder!
If you have never missed a payment before, you may be worried about debt collectors and bailiffs. But most of your worst fears about missing a bill, loan or credit card payment aren’t going to happen:
- you can’t get sent to prison for it;
- no one will be knocking on your door, not unless you ignore the problem for years.
It’s hard to make good decisions when you are stressed and anxious. But taking the first steps to sorting out your situation will help you feel more in control.
Don’t be an ostrich
It’s tempting to not open a letter or email when you know it’s going to ask you to pay more than you can manage. But that doesn’t make the problem go away and it doesn’t take the pressure off you either – the problems are always going to be in the back of your mind, stopping you enjoying life.
So open that letter and click on that email, because in the end not knowing is worse.
Don’t borrow more
Perhaps your card balances and loans have been going up for a while. But the more you borrow, the higher the minimum payments next month will be. Overdraft charges are going up in a couple of months. getting any new credit may be at even higher interest rates.
When you are in a hole, stop digging! Deciding to not borrow more, even if that means missing a payment, is usually the better option. Consolidating debt at a high rate of interest can be a disaster.
Know your priorities
You may be worried about the wrong bills.
It’s a big mistake to pay a credit card bill but not pay your council tax. You can get taken to court and have bailiffs sent round in just a few months for council tax, adding hundreds of pounds to the debt. That won’t happen with a credit card or catalogue for years – and never if you talk to the lender and explain your problem.
What is a Priority debt? looks at why some bills and debts are more important than others. Make a list of your debts and monthly bills and go through marking them as Priority or Non-Priority.
If you can’t pay all the “priority” debts and bills, then talk to a debt adviser. You need a payment arrangement with these in place first, even if that means you have to pay very little to your other debts.
Your everyday living expenses also matter more than loans and credit cards: food, toiletries, new shoes for the kids, transport to work etc. When you have paid for these essentials and paid your priority debts, the money that is left is all that is available for credit cards, loans and catalogues.
Can you improve your situation?
If you just have a temporary crisis, not a long-term problem, these Emergency budgeting ideas may be enough to get you through. But don’t fool yourself – is February really going to be any better?
If you have just overspent a bit, a few cutbacks and a financial detox may get you back on track.
Are you getting all the benefits you should be? If benefit problems are the cause of your debt problems, get some help to sort them out from your local Citizens Advice.
Tell a creditor what you can afford
If you only have one or two problem bills or debts, a simple approach is to phone or write and tell them why you can’t pay them in full this month.
Explain your situation, whether your hours have been cut, your benefits have stopped, you have priority debts or things have just got too much. Offer them an amount you can afford – a token £1 a month if necessary – and ask them to freeze interest and not add charges.
You are trying to make an arrangement that will last a while, so it’s better to offer a realistic amount than promise too much and have to phone them up next month to reduce it.
Read Is a payment arrangement right for me? to find out more about how to make a payment arrangement and if it is a good choice for you.
Or get help from a debt adviser
Phoning creditors may sound impossible if there are a lot of them or scary, especially if you are depressed or anxious.
Get some expert help when:
- you can’t pay a priority debt;
- there are too many creditors to deal with;
- you think it’s too stressful to talk to creditors yourself;
- you don’t know how much to offer or you can’t afford to pay them anything;
- when your debts seem too large to repay even if interest is stopped.
Good places to get help depend on where you live and the type of debts you have. All the suggestions in that link go to people who are not looking to profit from you. And you will be speaking to a sympathetic person in confidence, they can help you to look at your whole situation and explain what your options are.
Don’t google for help or you may end up talking to someone that will make big fees by getting you to take an IVA. IVAs are being mis-sold to many people who have better choices.
Good debt advisers don’t just tell you what to do, they can help you do it. They may be able to negotiate directly with your creditors and arrange affordable payments for you. Or set up a debt management plan so you just make a single payment each month which is divided between your creditors.
If you aren’t sure that your problem is serious enough for debt advice, it’s still worth talking it through. The sooner you call, the more options you will have.