According to ITV News, 11% of UK households were going into debt or increasing existing debt to afford Christmas last year. It can be easy to get carried away at Christmas and spend more than you can afford, but what happens if you have gotten yourself into debt?
Christmas Overspending
According to the Bank of England, the typical household spends almost £740 more in December, acting as 29% more than in other months.
In fact, households were estimated to spend £823.40 on Christmas this year, with many relying on credit to afford it, including 4% turning to general loans, 2.9% using payday loans, and 3.2% turning to family or friends for a loan.
Getting Out of Debt…
If you’ve gotten into debt, it’s very important to get out of it, but this can sometimes seem impossible. Debt can be incredibly overwhelming, but burying your head in the sand won’t make the problem go away. In fact, more often than not ignoring your debts will only make them build.
A good place to start is to:
- Make a list of everything you owe and to whom
- Work out which of these are priority debts, where serious action can be taken if you fail to make repayments, such as gas and electric bills or mortgage arrears
- Create a budget to figure out where spending can be reduced to help you work out how much you can reasonably repay to your creditors
- Now it’s time to get advice… you can click here for a list of free debt advice organisations
- The solution to your debt will be specific to you. It will depend on what type of debts you have, how much you owe, and how much money you can pay towards those debts.
Debt Solutions
There are a variety of debt solutions out there. You can read more about these on StepChange’s website, but here is a quick overview:
- Administration order- a legal agreement arranged by the County Court between you and your creditor to make repayments
- Arranging payments with creditors
- Bankruptcy- a legal process undertaken which writes off unsecured debts when you are unable to repay them within a reasonable timeframe
- Debt arrangement scheme- a scheme set up by the Scottish government where you repay your debts with affordable monthly payments without the threat of court action
- Debt consolidation-when you borrow enough money to pay off all of your different debts so that you now only owe money to one lender
- Debt management plan- an agreement between you and your creditors to pay all of your debts in affordable monthly payments
- Debt relief order- where your debts are written off 12 months after the debt relief order is approved, providing you owe less than £30,000 and meet the other eligibility criteria
- Individual voluntary arrangement- a formal agreement set up by an insolvency practitioner to make payments towards your debts via a lump sum payment or a 5 or 6 year repayment plan
- Insolvency- usually used when referring to businesses, this is where you can no longer afford to make debt repayments. You are insolvent if you file for bankruptcy
- Minimal assets process- a way of writing off debts for those with a low income with very few assets
- Protected trust deed- a formal agreement to pay part of what you owe to creditors via affordable monthly payments, often over a 4 year period
- Releasing equity- accessing the cash tied up in your home to help pay off your debts. You can read more about equity release here
- Remortgage your home- where you take out a new mortgage on your home to pay off debts by either releasing equity, or reducing your monthly mortgage payment
- Selling assets- where you sell something of value to have more money to pay towards debts
- Surrendering your property- selling your home to find cheaper housing to have more disposable income for debt repayments
- Settlement offers- where you offer your creditors a one-off payment to clear your debt
- Sequestration- a form of insolvency in Scotland
- Temporary repayment plan- where you make small monthly payments towards your debt