Managing money and avoiding debt can be difficult at the best of times. That’s particularly true at the moment. It’s Debt Awareness Week this week, so Mutahara Gofur looks at how to get help if you need it during the current crisis – and how to get back on track when things start to get back to normal.
Debt is already a big problem in the UK.
According to the Office of National Statistics’ most recent report, the total household debt in Great Britain was an eye-watering £1.28 trn between April 2016 and March 2018. Excluding mortgage debt and equity release, the figure was still high at £119 bn.
Now Covid-19 threatens to add to the problem.
To minimise your worries, here is some advice on how you can manage your expenses during the crisis, and get your finances in shape afterwards.
The UK Government have said they’ll cover up to 80% of people’s salaries, of up to £2,500 a month, if employers can’t pay. So if you’re employed you shouldn’t need to worry. Even small companies are eligible for grants to keep them afloat.
Last night (26 March 2020), the Government set up the Self-employment Income Support Scheme for self-employed individuals and members of partnerships.
Read the Government's guidance for employees
See how the Government is supporting businesses – large and small
The government have emergency legislation in place to prevent any evictions during the global pandemic in England and Wales. Legally, your landlord or estate agent cannot start eviction proceedings until you’re three months behind with your rent.
After three months, you'll need to work with your landlord to set up an affordable repayment plan that takes account of your changed circumstances.
In Scotland, tenants cannot be evicted for six months.
Check with your bank if you’re struggling to pay the mortgage, as you could be eligible for a three-month mortgage repayment holiday.
This is because banks made an agreement with the Chancellor of the Exchequer, Rishi Sunak, to offer ‘forbearance’.
The agreement applies to buy-to-let mortgages too.
If in doubt, check with your supplier.
In England and Wales, some water companies are offering financial support.
Energy suppliers have also been in talks with the Government. And many are putting measures in place to support those with prepay meters who may be self-isolating.
Different suppliers are providing support in different ways, so you need to find out what applies to you. Contact your energy and water supplier directly to find out how they can help you.
You should be able to claim refunds for most cancelled events such as concerts, theatre and sports. And you can now get a refund on nearly all train tickets.
Some wedding insurers will cover customers for cancellation. So if you have to cancel your big day all is not lost.
Getting help from your bank
Don't be tempted to use your overdraft without doing some research.
Thanks to the Financial Conduct Authority (FCA) consumers are better able to see just how expensive overdrafts really are. In a bid to increase transparency, the FCA has regulated that all banks replace fees with a single interest rate from 6 April. The result? Almost all providers are moving to 40% interest.
Some banks however, are waiving interest or offering an interest free buffer. Check your bank's website to see what applies to your current account.
Some credit card providers are offering payment holidays and emergency credit increases.
Prepare for getting back to normality
If you’re left with debt when all this is over, it’s vital to keep on top of it. The problem with debt is it can spiral out of control, which is where budgets come in.
The old adage, ‘make a budget and stick to it’, holds good at any time – whether you’re managing debt or simply planning your future.
You need to budget in order to calculate how much you can pay off each month. Fortunately there’s plenty of support out there, including a free debt management plan from the charity behind National Debt Week, Step Change.
There are loads of free budgeting apps – such as Yolt and Money Dashboard – to help you keep track of your money. Or why not check out the free budget planner from the Money Advice Service? They also offer tips on how you can save money, specific to your circumstances.
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