The Financial Conduct Authority (FCA) and MoneyHelper are advising consumers who are having financial difficulties due to the growing cost of living to seek assistance as soon as possible.
According to a recent study, nearly 42 per cent of struggling borrowers who ignored lenders’ attempts to get in touch with them did so out of shame. Two out of five or 40 per cent of people who were having financial difficulties believed mistakenly that speaking with a debt consultant would have a negative effect on their credit report.
Those who receive it find it beneficial. Eight out of ten or 79 per cent of people who sought debt assistance due to financial difficulties would do it again, and 70 per cent reported that it was more beneficial than they had anticipated.
Almost 52 per cent of borrowers who were having financial difficulties held off on requesting assistance for more than a month. Of those, 53 per cent regretted delaying their action. The longer people delayed after first encountering obstacles, the stronger this feeling of regret got, reaching two in three or 67 per cent among those who delayed longer than six months.
FCA executive director of consumers and competition Sheldon Mills says: “Anyone can find themselves in financial difficulty, and the rising cost of living means more people will struggle to make ends meet. If you’re struggling financially the most important thing is to speak to someone. If you’re worried about keeping up with payments, talk to your lender as soon as possible, as they could offer affordable options to pay back what is owed.”
Money and Pensions Service CEO Caroline Siarkiewicz says: “We know many people are currently feeling increasingly worried about money as the cost of living rises and many may turn to different forms of borrowing to help. Talking about money is more important than ever and makes many realise that they are far from alone. Taking the first step in talking about money problems can be the hardest to take but in doing so can help those get the support they need to find a way forward.”
Hargreaves Lansdown senior personal finance analyst Sarah Coles says: “It’s always difficult to admit you’re in trouble and need help. It’s even more difficult when you’re on a good income and everyone assumes you should be perfectly fine. It can also be a struggle to ask for support when you’re one of the ‘squeezed middle’, and you’re the person everyone else comes to for help. However, the sooner you tackle financial problems, the easier it will be.
“The HL Savings and Resilience Barometer, produced with Oxford Economics, and published this week reveals that Millennials are most likely to face unaffordable debts right now. They’re entering the ‘squeezed middle’ years, when they may have a young family to support on a reduced income, so rising prices have been particularly painful. It’s no wonder that only a quarter of them have good debt resilience. Generation X aren’t much better off, as many of them have also taken on large mortgages in order to get onto the property ladder, and face the prospect of being hit with higher interest rates when their fixed rate deal expires.
“Those on higher incomes also face challenges. They’re more likely to take on more debt, both as an overall figure and as a proportion of their income. This is likely to be because they feel they have the support of a good income, so they can afford to take them on. However, with life growing increasingly uncertain, and prices rising on all sides, they’re already more likely than lower earners to feel they have taken on more debt than is sensible.
“Both groups may find it particularly difficult to ask for help because they feel they shouldn’t need it. The FCA shows they’re not alone, but it also reveals how key it is to ask for help as soon as you can – two-thirds of those who left it for six months or longer wished they’d asked for help sooner.
“If you’re struggling with debt payments, your first port of call is your lender. You don’t have to wait until you’ve missed payments: you can talk to them even when you see problems looming on the horizon. They have a duty to try to support people who are struggling and agree a more manageable repayment arrangement. If you can’t pay anything for a short period, they may even agree to that.
“For some people, this can feel like walking into the lion’s den, so they can either contact MoneyHelper for support first, or talk to a debt charity like StepChange, who can talk to your lenders for you. If all this feels a bit much, start with someone you know and trust, and talk to them about the problems you’re facing. Once you have got over the hurdle once, you’ll find it far easier to face in future, and you’ll have someone on side to help support.
“They may be able to help you take stock of everything you owe, and check whether it’s possible to switch to a cheaper lender, so you’re paying less in interest. However, you need to be clear that this is your opportunity to get back on top of your debts, and not to borrow more.”
Quilter mortgage expert Karen Noye says: “Money continues to be a taboo subject, and this is particularly evident when it comes to debt. The FCA’s research into those struggling financially shows that many are not seeking support from their lenders when going into arrears because they feel a sense of embarrassment.
“Although understandable, burying your head in the sand is potentially the worst course of action when it comes to problem debt. There is a huge connection between mental and financial health, and it is always best to seek help otherwise as one aspect of your health deteriorates so does the other. The research reveals that 42 per cent of borrowers who were struggling and ignored their lenders’ attempt to contact them had done so because they felt ashamed. Lots of people are struggling with the cost of living crisis at the moment and there should be no sense of shame when asking for help during one of the most turbulent financial periods for a long time.
“In fact, according to the research a huge number of people felt that seeking debt help had proven useful with eight out of ten (79 per cent) happy to recommend it and 70 per cent saying it had been more helpful than they had anticipated.
“Getting into serious mortgage debt can have disastrous consequences. Not only could you lose a roof over your head, but you could end up struggling to get another mortgage because of poor credit history.
“It is never too late to seek help but getting help early on can stop you spiralling into a serious situation. Lenders have lots of options available to those struggling and it’s important to let them know how significant your financial difficulties are so they can decide how best to help.”
