'Startling' rise in demand for debt advice - what to do if you need help

Debt charity StepChange had more than 18,000 new clients in January 2023 - 22% more than any month in 2022, which it is calling a ‘startling’ increase in demand for debt advice during the cost of living crisis.

Falling into substantial debt can be a traumatic experience that impacts many areas of your life. If you are struggling to pay off what you've borrowed, there are things you can do to help keep a lid on your debt.

Here, we outline the steps you can take to get back in control of your finances, as well as the organisations you can contact for help.

Why are people in debt?

The Covid-19 pandemic and subsequent cost of living crisis have continued to have an adverse effect on some people's finances.

Of the 18,000 new users who sought out full debt advice in January, a quarter (24%) cited 'cost of living' as the main reason for their debt. Other common reasons include having a lack of control over their finances, and unemployment or redundancy.

While it's common for there to be an uptick in debt at the start of the year - due to increased outgoings over the Christmas period - the 77% increase between December 2022 and January 2023 is far higher than what the charity saw the year before, when there was a 48% increase between December 2021 and January 2022.

StepChange has also seen a growing proportion of people who are behind on their dual fuel bills (ie gas and electricity). Over half (51%) were in arrears in January 2023, compared to 42% in January 2022.

Having debt isn’t an issue in itself - most people will have some form of it, usually in the form of a mortgage on their property, credit card or overdraft on their current account. 

But should a debt be left to spiral out of control, it can feel impossible to cope. If you are feeling stuck in debt, there are measures you can take to help.

• Find out more: help if you're struggling to pay your energy bills

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Tips to pay off your debts

Here is a range of tips to keep your debt under control, in order of things that might be easier to tackle first.

Work out where you stand

It can be tough to face up to your financial situation, but it's an important first step. 

Start by creating a list of all your credit card, store card, overdraft, buy now, pay later (BNPL), loan and mortgage debt, as well as your essential household bills. Then check how much you owe on each and what you're currently paying each month. 

Then create a household budget plan to summarise your earnings and spending habits, so you have a clear idea of where your cash is going and where you can make changes to reduce outgoings, and boost the money you have to pay down your debt.

Check your credit report - and improve your credit score

Checking your credit report is an important part of maintaining your financial health. It allows you to pick up on any mistakes – or even fraudulent applications – that could hinder your chances of getting credit. 

Credit reports are compiled by credit reference agencies. The three main agencies in the UK are Experian, Equifax and TransUnion, and you now have the legal right to access your credit report for free from any of them. 

If you find your score is low then there are ways to improve it, do check it for mistakes and get those rectified first. Registering to vote and ensuring your rental payments count are just a few of the ways to easily improve your credit score.

Pay off your debt before saving

While it's a good idea to have a financial backup for use in emergencies, there's little logic in having savings if you owe money on a credit card or overdraft.

The rates available on the best instant-access savings accounts are significantly lower than the average credit card interest rate, which is around 21% APR. Therefore, using your savings to pay off your borrowing could save you hundreds of pounds a year in interest charges.

It’s also advisable to separate any debts and savings you have with the same provider to avoid them ‘setting off.’ 

The provider has the right to ‘set off’ and use money held in your current or savings account to pay off debt such as a credit card or personal loan. While it’s unlikely to happen, it can, especially if you’re juggling your debt repayments, and would have a big impact on your personal cash flow. 

The best way to avoid it is to move your savings to a different financial institution (savings are usually easier to move than debt). 

• Find out more: tips to help pay off your debts

Where to get debt help

There are several national organisations offering free, impartial help and advice if you're struggling with debt.

Free debt advice organisations include Citizens Advice, Community Money Advice, Debt Action NI, Debt Advice Foundation, National Debtline, PayPlan and StepChange.

You could also consider using a professional debt adviser. They will look at your financial situation and recommend the best debt solutions to suit your circumstances.

The adviser can suggest which debts to prioritise paying, tell you what your rights are, and help you negotiate with creditors to arrange alternative repayment plans. If you have serious debts, they may point you towards a debt solution, such as an individual voluntary arrangement or debt relief order.

A debt adviser can help you access the government's Breathing Space scheme, too. People in England and Wales who are struggling with problem debt can get a 60-day grace period, when interests and charges on their debts will be frozen.

• Find out more: free debt advice organisations