Break the Cycle: Clear Debt Without Another Loan

hold on beautiful Heather Stillufsen

Heather Stillufsen

The world is in staggering debt (so is the government). In August 2023, the average household in England owe £2000 on credit cards and £60,000 in overall debt. This is no time to feel guilty or ashamed. Being in debt just helps banks (huge profits for shareholders) and lawyers. Also  read posts on giving up lotteries and gambling.

If you’re in debt, it’s not going to go away. Get a cup of tea (or large glass of wine), sit at the table and write down how much you owe and to who. Most companies prefer a token payment (it’s less hassle than taking you to court).

Download sample letters (also for business) to offer a payment plan. If no joy, then contact a debt charity (below).

The Multibank has branches nationwide that distribute donated goods to families in debt. You can donate clothes and shoes, unwanted toiletries, bedding and home furnishings, or businesses can donate production-line runs so people can buy or receive goods at the lowest price.

List All Your Debts. Create a detailed list of all your debts. Name the creditors, interest rates, minimum payments, and due dates. A spreadsheet or a simple handwritten sheet works well for this.

Cancel Unused Direct Debits. Many people have thousands exiting their bank accounts each year, due to forgotten direct debits say for insurance or gym memberships.  Look through at least the last three months to catch any that might not show up every month.

Calculate Your Monthly Income. Next, you’ll want to determine your net monthly income. This includes salaries, side gigs, rental income- everything. Subtract taxes, savings, and any automatic deductions. What’s left is your spending money. From this, you’ll allocate funds for debt repayment.

Create a Realistic Budget. Separate expenses into fixed and variable. Fixed expenses include rent, mortgage, insurance, and car payments. Variable expenses are groceries, dining out, and entertainment.

Set short-term goals like paying off small debts or saving £100 a month. Long-term goals could be paying off a loan in five years.

Choose a Debt Repayment Method. The Debt Snowball Method pays off smallest debts first, so you are motivated to see them disappear. Once the small debt is gone, roll that payment over to paying off the next smallest debt.

The Debt Avalanche Method focuses on debts with highest interest rates. This method saves you most money in interest payments. This tackles debts that cost more over time.

Pay off essential debts first (energy, water, council tax), and debts to family/friends.  Don’t go near payday loans (most are banned). If you’ve got involved with loan sharks, contact a debt charity (below) for advice.

Bailiffs can only enter homes with permission and take goods to sell (TV, furniture, jewellery, cars). They can’t take pets, nor ‘things’ you need (washing machines, beds, cookers, vehicles with disabled badges and ‘home’ camper vans).

Fair for You can help.

Still in Trouble? Contact a Debt Charity

StepChange Debt Charity is funded by industry to provide free help to anyone struggling with debt. Its trained advisors can give advice by phone and there is tons of free advice online. All help is impartial and confidential.

This charity helps hundreds of thousands of people each year. Just tell them your circumstances (don’t worry, they’ve heard it all), and they will then tailor a plan especially for you. Over 30 years, they have managed to help over 7 million people become debt-free, without paying debt consolidation agencies.

StepChange is registered with the Financial Conduct Authority, and does not make money from people it helps. All profits go back into the charity, to help more people.

The range of possible remedies (depending on your circumstances) include:

  • Debt Management Plan. This is the main help offered, where your expenditures and income are gathered together, to create a plan that’s affordable yet can clear your debt over time. Your debts are handed over to them, and they create a flat monthly charge to come out of your account, and they take care of the rest. In some circumstances, interest may even be frozen or cancelled.
  • Individual Voluntary Arrangements. This is where you pay a reduced rate over a fixed period of time. Once you’ve done this, remaining debt may be written off.
  • Debt Relief Orders. This is when debts are written off after a year, if you are on a low income with few assets. There are no fees to pay.
  • Debt Arrangement Scheme (Scotland only). This is when you pay back only what you can afford. Trust deeds (also only in Scotland) are where you pay off debts over four years, and again remaining debt is written off.
  • Insolvency. If you are considering declaring yourself bankruptcy, contact StepChange that can provide free expert help and advice.

Equity Release. If you are considering releasing part of your home to free up capital, again StepChange can offer free impartial advice, to save you being ‘sold’ anything dodgy. And you can be made fully aware of the advantages and disadvantages/risks, before you make a decision.

Other Trustworthy Debt Charities

  • National Debtline runs a good website and phoneline. It has a fact sheet library ((self-employed people can visit Business Debtline).
  • Debt Advice Foundation (be careful as others have similar names) is a non-profit with a good reputation.
  • Christians Against Poverty (helps people of all faiths and none) can set up a plan to save and pay off debt. Churches can run their free budgeting courses (they also run job clubs to help write CVs and brush up on interview skills).
  • Payplan is the non-profit arm of a for-profit company, to help with mortgage problems and negative equity.

Lifestyle Changes to Reduce Debt

  • Cancel unwanted subscriptions to gyms, streaming services, magazines etc.
  • Cooking at home saves money and is healthier. Plan meals and shop smart to maximise savings. You may even discover a passion for cooking.
  • Don’t waste time on energy-comparison sites (listing costs are passed to you). It’s simpler to live simply, this will naturally reduce energy bills.
  • Give up smoking and (cut down or give up) drinking alcohol.
  • Go car-free or join a car-sharing club.
  • Train for a couple of years to do what you love (to earn more money for less hours).
  • You could (if viable) downsize to a smaller place (a city flat could be swapped for a small home in a cheaper area).  Or rent out a room (tax-free)
  • If your family gets on, extended family homes are when relatives sell properties to share one. Say 3 people sell tiny flats to buy one larger garden property (for no mortgage or cheaper payments, with free baby/pet/granny sitting on top).

Not Needing New (a guide to the joy of ‘enough’)

not needing new

Not Needing New is just one book in a growing number, from writers who are inspiring others to say ‘no’ to economic growth and endless consumerism, and give up buying rubbish they don’t need to please others or themselves.

This book is the ultimate toolkit for embracing sustainable second-hand living, and letting go of the constant need for ‘more.

Don’t give away items that could harm wildlife like strimmers (recycle them and get edging shears instead). The Lullaby Trust does not recommend donating (or buying) second-hand baby items like mattresses or car seats (and never use cot bumpers). Its site has more info on preventing crib death. 

Before cooking, read up on food safety for people and pets. For tinned foods, remove and pop lids inside, or pop ring-pulls back over holes (pinch top closed) before recycling, to avoid wildlife getting trapped. Also read about pet-friendly gardens to know toxic plants and flowers to avoid. 

In challenging financial and emotional times, the author transformed her life by finding the joy in enough, and now wants to show you how to do it tool. She offers tips on:

  • Discovering second-hand style
  • Holidaying on a budget
  • Simple parenting
  • Saving money
  • Learning to do things yourself

I was (am) in a financial situation where it was the only way to manage. People kept saying things looked good, or cool, or stylish and I heard myself saying over and over, that it was from the charity shop, from the tip, found in a freebie box etc. Anna

Anna Kilpatrick is a single mum who after her children’s dad suffered a stroke, lost their family home and now she and her children live in a small flat (she hasn’t had her own bedroom for eight years, and they have no garden). She works for a vintage car restoration company and personal circumstances means she had to give up her teaching career.

She has 14 (!) siblings, a builder boyfriend single dad and a faithful dog. She is proud that she keeps going on limited means and even gave up alcohol, and now feels even better! She writes that despite everything, she now has pretty much everything she wants or needs. And hopes to inspire you to feel the same!

Emma app helps take control of your finances.

Claimed benefits if you’re entitled (refuse stigma)

Oxford Ava Lily

Ava Lily

There is a lot of stigma about claiming benefits. But the fact is that most people who claim them are not going around the country talking in smartphones and watching expensive flat-screen TVs.

Most benefits are pretty low (you can’t do much on £100 a week Universal Credit) and there are billions unclaimed, from those who deserve them most (carers for disabled children and elderly relatives etc).

The most underclaimed benefit is (very expensive) Council Tax, with almost 3 million people not claiming almost £3 billion in help.

Visit the government website to find out what you can claim, how to claim and find a form to do it (or numbers to call). Visit Benefits Cloud for more help.

One helper in Kent secured an extra £11,500 a year for a pensioner couple who were living on low benefits. And in Coventry, a pensioner who was living on £55 a week (seriously) received an extra £138 a week (over £7000 a year) once benefit checks were performed.

Collectively, around 850,000 pensioners across the UK are not receiving what they are entitled to. And for those who are from the ‘get on your bike and find work’ generation, it may take a little persuasion to have them take the money. But they worked and paid taxes all their lives, so let’s return the favour.

Some of the Main Benefits

  • Universal Credit is for those who are looking for work, to top up low-paid jobs or unable to work due to illness. It’s designed to cover living costs, and once qualified, you may also be able to  get help with housing costs, if you provide a tenancy agreement.
  • Pension Credit is for people on low incomes. Martin Lewis famously stated that ‘just one 10-minute phone call could get you an extra £11,000 a year (and entitle you to many other benefits).
  • Carers’ Allowance is for those who spend at least 35 hours a week caring for someone on disability benefits. Whether you live with them or not.
  • Council tax discounts are available if you live alone (25% discount) or you are on a low income or student (or have a severe mental health issue).
  • Child benefit is for people who look after a child under 16 (or 20 in education) to cover the costs of raising a family.

Getting Help from Others: Where to Turn

Sometimes claiming benefits can be a minefield, especially for people with dementia, mental health problems, or no access to a computer or telephone:

  • Citizens Advice offers free help online, and in person via their offices (book an appointment).
  • Christians Against Poverty is a charity that helps people with financial difficulties (you don’t have to be Christian for them to help). It has its own free benefits calculator online, which only takes 10 minutes.
  • The free Better Off Helpline (run by Nationwide) is for anyone to use.
  • AGE UK offers a great benefits calculator, or alternatively use the free phone number, for someone to do this over the phone for you. Its advice line can help anyone who needs it.

More Than Just Money in Your Pocket

Claiming benefits also entitles you to some other things, if you living on a very low income. These can include:

How Common is Benefit Fraud?

Benefit fraud is obviously when people claim for money they are not entitled to, whether that’s providing false information or not reporting a change in circumstances. Many say the easiest solution is simply to scrap most benefits, and replace with a Basic Income.

Then everyone gets enough to live on, and can work part-time or care for others or work full-time. Everyone’s happy, there is better life/work balance and no benefit fraud (that costs millions if not billions to find and mop up).

It’s interesting that tax evasion is around £5.5 billion. Yet benefit fraud (although substantial) is far less (around £3.3 billion).

Yet MPs focus far more on those who cheat the benefit system, rather than donors who live abroad and don’t pay tax (or big multi-nationals who use clever accountants to set up shop here, but then pay little or no tax to contribute to the NHS and other public services).

Follow us on PinterestFollow

Similar Posts