Free debt advice offered by charities including Citizens Advice and StepChange can help people take control of their debts.
There are also debt management companies (DMCs) who will help customers consolidate their monthly debt payments - for a fee.
Taking the first steps to get out of debt can be difficult, but understanding your debt options can help.
Where to seek help with debt
There are steps people can take themselves to get on top of their debt and start to understand the scale of the problem.
As our guide to dealing with debt explains, there are five important things we should do:
- Assess the problem
- Make a budget
- Seek the right help
- Be realistic
- Be aware of your stress levels
The third point is the most crucial: we need to understand what help is on offer and which providers offer advice for free.
Debt advice is available for any kind of debt problem from a number of sources, including specialist debt charities, money advice charities and local authorities.
How debt advisers can help
Debt advisers can help us get on top of our debts and empower us to take the right steps to address our debt problems.
Working with a debt adviser often follows a three-step process:
- Customers provide full details of all their debts and their monthly income and essential outgoings
- The adviser helps to establish a range of solutions
- Customers are provided with recommendations on which steps to take, although the choice is ultimately theirs
This process is a transparent way of helping customers address their debts and should be the kind of advice customers receive no matter whether they choose free debt advice or to pay a debt management company for their services.
A Government scheme called Breathing Space also offers legal protections to people who are seeking debt support.
It offers 60 days of respite from debt reminder letters, additional charges and other enforcement action such as bailiff visits while a customer gets a debt plan in place.
Debt advisers may propose one of the following ways to manage debt:
- Debt management plan (DMP)
- Individual Voluntary Arrangement (IVA)
- Administration order (AO)
These have their pros and cons as well as limitations, so it's important to listen carefully to be advice given by a debt specialist to understand how each option may affect you.
A popular solution is a debt management plan (DMP).
This is an informal debt repayment method organised by debt advisers who assess a person's monthly income and expenditure and then consolidate any remaining money to pay off debts.
With DMPs the debtor makes a single monthly payment to the debt management organisation - based on the assessment by the debt adviser of how much they can afford - and the debt organisation sends this money on to creditors on behalf of the debtor.
Sometimes debt advisers will suggest individual voluntary agreements (IVAs) as a more formal option for repaying debt. These agreements are a legally binding version of a DMP in which debt is repaid over five years and the majority is usually written off after this period.
Whereas some DMPs are free to set up, IVAs have to be set up by an insolvency practitioner and this comes with fees (usually around £5000).
An AO is a formal and legal debt solution approved by the court. To be eligible, someone must have no more than £5000 in debt and a county court judgement. The individual must then pay the monthly amount agreed on in court to the court itself, who distribute it amongst the creditors.
Bankruptcy is also a court process. An individual can either declare themselves bankrupt, or a creditor can ask the court to make an individual bankrupt, even if they don't want to be. There can be benefits, and it can be a way of taking real debt pressure off. However, it stays on a credit record for 6 years, and homeowners might have to sell their homes.
Debt advisers will carefully assess a person's situation to help them decide what the right option is for them.
Citizens Advice is the primary service that offers debt advice across the UK.
They provide support in around 2,500 locations across England and Wales, along with having strong support networks in Scotland too.
Here are their contact details:
|Citizens Advice England and Wales||080 144 8848 in England, 0800 702 2020 in Wales||Contact|
|Citizens Advice Scotland||0800 028 1456||Contact|
During 2020/21, Citizens Advice England and Wales helped 2.4 million people with advice across their different services, with 40 million visits to their website over the year.
Customers in Northern Ireland should contact Advice NI through their website or by calling 0800 915 4604.
There are lots of other services in addition to Citizens Advice. Here are some of the best ones that provide free advice:
|Debt Advice Foundation:
0800 043 4050
|Monday to Friday 8am to 6pm|
0808 808 4000
|Monday to Friday 9am to 8pm, Saturday 9:30am to 1pn|
0800 138 1111
|Monday to Friday 8am to 8pm, Saturday 8am to 4pm.|
0800 280 2816
|Monday to Friday 8am to 8pm, Saturday 9am to 3pm|
Remember, not all of these will be available at every location in the UK, or there may be additional local services in your area. The services detailed above do, however, all offer online services.
Although the debt advice services listed above provide a helpful and often life-changing service to those who need help, sometimes specialist help can offer more tailored services for those with a specific problem.
For under 25s:
The number of young people in debt is growing, but there are some specialist sites that can help, including Citizens Advice-run The Mix.
The Mix is a charity specifically aimed at helping the under-25 age group. It is a comprehensive online resource which covers a number of issues faced by this group, including money problems and debt.
The Prince's Trust charity also provides specific debt advice to young people.
For single parents:
Single parents face a higher risk of poverty than other households, as high living and childcare costs tighten single parent finances.
Gingerbread is a charity set up to support single parents. It offers guides that provide advice on all aspects of personal finance from income support to managing monthly bills.
For those with a gambling problem:
Gamcare provides help for anyone suffering with debt because of a gambling problem. It has an online forum and a telephone helpline open 24 hours a day, seven days a week.
Christians Against Poverty run services through local churches and have a wealth of information online and in person.
Based in Manchester, Islamic Debt Help also offer religious-based debt help and can help individuals with an IVA, budgeting service or negotiating with creditors.
Additionally, it's worth noting that there are rules in place to help protect vulnerable borrowers, such as people with mental health issues or capacity limitations, which include additional rules for those struggling with debt.
See our guide on how lenders should protect vulnerable borrowers for more on this.
Debt management companies
The debt advice bodies we've discussed above are all charities. However, there are also many commercial debt management companies (DMCs) that offer to help people with their debts.
There are a few things to note about DMCs:
- They consolidate debts into a single monthly payment
- This money is then distributed among creditors
- They charge a fee averaging around 17% of the monthly payment
On this last point, it means the overall cost of the debt can balloon, adding months or even years to the time it takes to pay off a debt.
A more straightforward option for consolidating debts in this way could be a debt consolidation loan. However, people struggling with debt may not have the best credit rating and might not be able to get one of those loans.
Even so, customers looking at debt management companies may want to bear in mind that the sector hasn't always had the best reputation.
A small proportion of the debt management industry has a reputation for some serious failings in the past.
In late 2011, the Office of Fair Trading (OFT) told many DMCs to clean up their act following numerous complaints about mismanagement affecting the most vulnerable customers.
More damningly, in 2015 the Financial Conduct Authority (FCA) - which took over from the OFT in 2014 - strongly criticised a number of debt management firms for failing to properly assess the financial circumstances of debtors, and also for encouraging them to take out unsuitable repayment plans.
The FCA also criticised these firms for failing to make people aware that free debt advice was also available, favouring profit over providing helpful debt solutions.
Ultimately, several firms were suspended and closed following the report.
More recently, the FCA berated the sector in 2019 for ill-treatment of vulnerable customers: two-thirds of reviewed companies were told to make urgent improvements.
None of this means that all debt management companies are necessarily a bad idea for customers, but it's something to be aware of.
What happens if my debt management company closes?
Debt management companies may close down after dealings with the FCA or if they no longer think the industry is profitable.
If a DMC closes down, customers may feel as though they have been left in limbo, but there are steps to take to get back on track.
Essentially, there are two options:
- Get free impartial advice from one of the charities we've discussed above
- Move to another DMC
Taking debt advice from a free adviser can help customers understand whether another debt management company is the right option.
In addition, some DMCs may see the closure of one of their rivals as an opportunity and may pressure customers to sign up with them instead.
Ultimately, if a customer is happy with a DMC arrangement then they may prefer to carry on with that, but taking independent and free advice is usually a good step.
When is it time to seek debt help?
There's no singular tipping point to be reached before people seek debt advice.
Often, debt comes on slowly and we might not realise there's a problem as it gradually builds up. Debt might come from a sudden change in circumstance, or from consistently spending beyond our means.
Some debt might not be a problem, such as student loan repayments, a mortgage, or even small sums on a credit card. These things usually allow us to access higher education or a house, without coughing up the entire large sum upfront. If these can be paid off monthly without impacting too much on someone's budget, they're usually manageable.
However, other small scale debts can be a problem because the interest builds up. The longer it takes to pay off debt, the more interest we pay, yet prioritising debts over household bills can lead to other issues.
Additionally, carrying around a lot of debt can mean credit card and mortgage refusals, which are big barriers to home ownership. It might also mean that other loans and even life insurance are denied.
There are a number of red flags which might suggest that it's time to ask for help, even for people who haven't considered getting advice before:
- Difficulty paying for the basics: Cutting back on unnecessary purchases to pay for a debt can be a good thing, but nobody should go without food or struggle to meet the rent just to pay off a debt.
- Confusion about the demands that lenders are making: Can't make the sums add up or confused about the rights a collection agency has to recover money? It's time to ask an expert.
- Using credit cards to pay for essentials: A credit card can help pay for basics and other demands in the short-term, but taking on credit card debt to pay for basics, or withdrawing cash on a credit card, is a red flag.
- Debt stress: Signs of extreme stress - such as panic attacks and sleeplessness - are more common among those with debt problems than they are in the general population. Debt advisers as well as doctors can help people get back on track.
- Increased borrowing to pay off existing debts: For those who spend more than they earn, borrowing to fill the gap might lead to a higher proportion of income going on debts, and therefore less to spend on necessities or to maintain a lifestyle - which means increased borrowing and more debt.
- Resorting to payday loans: In general, these are loans that lend to people with low credit scores at exceptionally high rates of interest - they can add on hundreds of pounds to someone's debt.
Sometimes friends or family might express concerns about debts, either about the amount itself, or someone's behaviour or stress surrounding it.
People who are struggling with debt might get angry or deny there is a problem or even hide the true amount of debt from loved ones. This can be a sign that debt is taking too much or a toll and it's time to get help.
Summary: Debt help available
Admitting we have a debt problem and seeking support is often one of the hardest things we will do in our lives.
However, there are plenty of organisations out there who are committed to helping and, as long as we are open and honest with them, they can guide us on the path to becoming debt-free.
At the same time, there are less scrupulous providers of debt advice who are more focused on taking a cut of our monthly payments rather than helping us get out of debt.
When searching for debt advice, remember the following points:
- Anyone can access free impartial debt advice
- There are different charities in different parts of the UK to help
- A debt management company (DMC) might be a good option for some customers but remember they charge fees and the debt will take longer to pay off
- Other formal options to get out of debt such as IVAs may be available
Ultimately, getting out of debt requires individual effort and perseverance. Yet there are various support options that will make this individual effort easier and ensure it's working in the right direction.
Read more about how we're managing our debts.