Debt Awareness Week: Five things you should know about debt advice

Following a year of sky-high inflation putting a strain on household finances, new research by StepChange Debt Charity has found that almost one in six (15%) people has just £20 or less disposable income each month after covering bills and essentials. The survey comes as the charity marks its annual campaign Debt Awareness Week, which this year aims to increase understanding of what debt advice is and how it can help you.

Richard Lane, Director of External Affairs at StepChange Debt Charity, said:

“Misconceptions exist around what happens when you get debt advice, and at a time when so many are struggling to cover their basic living costs, and are at risk of falling into problem debt, it’s vital that they aren’t put off from getting support due to inaccurate information. Our polling revealed that one in six (16%) people do not know that debt advice organisations exist, while one fifth (21%) of people wrongly think that contacting a debt advice organisation for help will have a negative impact on their credit score.

“This Debt Awareness Week, here are some of the most important things you should know about debt advice.”

Free and impartial debt advice is available

While you can seek debt advice in different ways – over the phone, face to face, or online – one thing debt advice should always be is free, you never need to pay someone to provide you with advice for dealing with your debts. Organisations like StepChange, National Debtline and Citizen’s Advice are charities providing free advice tailored to someone’s personal circumstances.

It’s also important to make sure the advice you’re getting is impartial, meaning the organisation or person providing you with advice does not have a vested interest in one particular course of action or debt solution. All the charities mentioned above give advice which is impartial and also non-judgemental, so it doesn’t matter how your money worries started, the advisor will support you to find the best solution to get your finances back on track.

Always make sure any organisation you get debt advice from is authorised and regulated by the Financial Conduct Authority (FCA).

Seeking advice won’t impact your credit score

While many might be reluctant to get help with their finances because of a potential impact on their credit score, seeking debt advice will not affect or worsen your credit score. If you are in problem debt and have missed payments at the point of getting advice, your credit score may have already been impacted. However, if you enter onto a debt solution, such as a repayment plan or type of insolvency, this will be reflected on your credit file.

Solutions to your debt problems will be offered

The phrase ‘debt advice’ may make you think of getting information and guidance rather than a plan of action to address your debt. However, when you seek free advice from a reputable charity like StepChange, whether over online or over the phone, the process is more detailed than you may think. You’ll first be taken through a budgeting session, where you will be asked to outline your full monthly income and expenditure in order to create a budget. We may suggest ways to reduce your spending or increase the money you have coming in each month, as well as explaining which of your debts would be a priority. Following that you’d get a personal action plan and be recommended debt solutions that suit your situation. There are several possible debt solutions, these could be a type of insolvency or a debt management plan (DMP), for example.

You may be able to get Breathing Space

The process of getting help with debt can be stressful, so the Breathing Space scheme is set up to relieve some of that pressure. If you pass the eligibility checks for Breathing Space, your creditors won’t be able to add interest or fees to your debts, or take enforcement action, for 60 days. This allows you the time to seek debt advice and get a plan of action in place for dealing with your debts.

Be cautious when looking online for debt help

When looking online for help with debt problems, it can be difficult to know where to start. Adverts offering to ‘write off up to 80% of your debt’, often pop at the top of the search results or through targeted advertising on social media platforms. Not all of these ads are genuine and could lead you to take a debt solution that isn’t appropriate for your situation and could worsen your debt, this is usually without getting free, impartial advice first. The ads tend to be run by ‘lead generators’ who will pass someone’s details onto a commercial debt management firm for a fee. Some of these adverts will even impersonate debt charities by using similar names and brand colours, so be really careful to double check website URLs, social media profiles, email addresses and other contact details to avoid scammers and ensure the help you’re receiving is genuine.

Free, confidential debt advice is available 24/7 using StepChange’s online debt advice service.  Visit www.stepchange.org for more information on how to get help with your debts.