Struggling with debt can feel very overwhelming, especially when it spirals into a full-blown debt crisis. For many living with debt, sleepless nights, a constant feeling of stress, and even an ongoing sense of helplessness and dread are common.
However, it’s essential to remember that, no matter how bad your financial situation might seem, there are always steps you can take to gain back control and get your financial life back on track.
With this in mind, in this guide we explore the symptoms of a personal debt crisis, highlighting the importance of recognising these signs in acting to remedy them. This section will also define the concept of debt spirals – an unfortunate and all too common experience for those struggling with debt – again focusing on educating people to recognise the signs and suggesting ways of arresting the decline.
Finally, we run through our five essential ‘things to know’ when it comes to facing your debt head on.
Are you in debt crisis?
Although it may sound a bit of a cliche, the truth is, until you recognise your debt is becoming a significant issue in your life, you won’t be able to take the best course of action to regain control. For this reason, simply recognising whether you are in a debt crisis is the first step toward addressing it.
Common signs of a personal debt crisis can include, but are not limited to:
- An inability to pay your bills on time
- Relying on credit cards for everyday expenses
- Receiving frequent calls/final demand letters from creditors
- Feeling like your debt is growing despite you doing your best to make your repayments.
If any or multiple of these signs ring true with you, it might be time to seek help and take action.
What is a debt spiral?
As the name suggests, a debt spiral starts when your debt begins to grow uncontrollably. This rapid decline in financial situation is usually down to high-interest rates and ongoing borrowing to cover existing debt obligations.
This creates a vicious cycle where you borrow more to make payments, leading to increased debt levels and higher interest costs. Over time, this spiral can make it almost impossible to break free from perpetual debt, as the amount you owe continues to compound and consume a larger portion of your income.
How to deal with debt: what you need to know
Once you have identified that your debt is becoming an issue, acting quickly is really important. However, it also requires thought. Jumping in with half-thought-out solutions can often just make the situation worse. Instead, dealing with debt effectively requires a strategic approach and utilising all resources available. With this in mind, here are some top tips to help you manage your debt:
1) There are sources like MoneyHelper for free debt advice and services.
You can find out more by visiting the Money Helper website or calling 0300 500 5000 (8am – 8pm Monday to Friday, 9am – 1pm on Saturday).
2) You should have been advised on all the options for dealing with your debt.
Protocol-compliant providers will explain all the options that are open to you (e.g. Bankruptcy, Debt Relief Order, Individual Voluntary Arrangement, Debt Management Plan). The advantages and disadvantages of each will be discussed with you so that you can make an informed choice.
3) You will know the estimated total cost to you of the arrangement and the time it will take for your debts to be paid.
Protocol compliant providers always give you this information. If your provider does not, you must ask to find out. Any money you pay to your provider to cover their fees will not be used to repay your debts. Think carefully if more money is being used to pay your provider than your creditors.
4) Your provider will go through a full and accurate budgeting process with you.
This is vital to make sure that the payments you are asked to make are affordable for yourself and fair to your creditors.
5) If you are not happy with the service you receive, you can complain.
You should refer such complaints to the provider first to give them a chance to put things right. They should tell you clearly how to do this. If you are still not happy with the outcome, you can complain to the Financial Ombudsman Service which is an independent service who will look into your complaint and can award you compensation if they decide in your favour.
Take a look at our debt help video
Watch our video to see how our debt advice service works, including how we communicate with creditors and offer tailored support based on your specific financial circumstances.
