The Financial Conduct Authority (FCA) and MoneyHelper are urging consumers to get help as soon as possible if they are struggling financially because of the rising cost of living.
Millions of people get help with their finances every year. However, new research suggests many borrowers are missing out on available support.
The research reveals some people who are struggling financially are not seeking support because they are embarrassed. 42% of borrowers who were struggling and ignored their lenders’ attempt to contact them had done so because they felt ashamed.
Two out of five people (40%) who were struggling financially incorrectly thought simply talking to a debt adviser would have a negative impact on their credit file.
Those who get help find it useful. Eight out of ten (79%) people in financial difficulty who used debt advice would recommend it and 70% said it had been more helpful than they had anticipated.
More than half (52%) of borrowers in financial difficulty waited more than a month before seeking help. Of these, 53% regretted not doing so sooner. This feeling of regret became stronger the longer people waited after first experiencing difficulties, increasing to two in three (67%) among those who waited more than six months.
In response to the research, the FCA and MoneyHelper are urging consumers to:
- Contact their lender if they are struggling to make their payments. The FCA recently reminded lenders of how they should provide customers with help and support that takes account of their individual needs and circumstance if they are struggling with their payments. Where appropriate, this can include agreeing reduced or no payments for a period.
- Contact MoneyHelper if they are worried about money. The government backed service can help people find a way forward whether it is living on a squeezed income, working out how to prioritise bills and payments, or access to free, expert debt advice.
The FCA and MoneyHelper have published top tips for those who find themselves in financial difficulty:
- Open up to someone as soon as you can. Talking about money can be challenging because of feelings of shame, embarrassment or not wanting to burden others. However, opening up to someone can be an important first step to help you regain control of your finances. Do not wait to contact your lender if you get into difficulty – you can talk to them even before you miss a payment.
- Work out your debts. Write down everything that you owe. This might seem overwhelming but facing up to what you owe will help in the long run.
- Prioritise your debts. Debt advice can help you work out how best to prioritise your debts. Priority bills and debts include things like mortgage, rent and utility bills. Debt advice can help you put in place arrangements for other debts so that you can focus on your priority bills and debts.
- Shop around for affordable credit. Before taking out any new borrowing, consider how this fits in with your overall financial position to ensure it doesn’t make matters worse. If you do need to borrow more, shop around for affordable credit. While it can be tempting to use high-cost credit options like payday loans, more affordable options may be available from other lenders such as credit unions.
- Set a budget. A good way to understand how much you can afford to pay back each month is to write down what your income is and list all your expenditure. The budget planner on the MoneyHelper website can help you calculate this.
Sheldon Mills, Executive Director of Consumers and Competition at the FCA, said: “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.”
Caroline Siarkiewicz, Chief Executive of the Money and Pensions Service said: “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.’
“Our MoneyHelper website provides guidance on maximising your income as well as practical help on how to talk to creditors. For those who are already struggling to keep on top of bills and financial commitments, we suggest seeking free debt advice immediately. The Debt Advice Locator Tool on the MoneyHelper website can help you find a suitable debt adviser.”