Debt advice
'Some types of debt are MUCH better than others... All debts are not the same!' (Martin Lewis, www.moneysavingexpert.com)
There are two ways of thinking about debt, that all debt is bad and something to worry about or that some debt is a sensible, temporary undertaking to improve your life. Most home owners would never have been able to buy their home without borrowing a mortgage, for instance. The key thing is to be sensible, don't borrow more than you can repay and search around for the best kinds of borrowing.
When borrowing money it is important to know how much interest you will pay and how much this will cost you. Interest rates can vary from 0% percent to 37% and will determine just how much it costs to borrow the money you want.
For instance, if you borrow £1000 at 15% per year, by the end of the year you will owe £1,150.
The real danger though, is that interest compounds, in other words if you borrow over a long period you will end up paying interest on the interest on the interest! This means that while you may have in your mind that you borrowed £1000, at 15% interest over 5 years you would end up owing £4000!!
Sometimes you may not be able to avoid borrowing money but always look at how it's going to affect you in the long term and be sure that you can afford to make the repayments.
If you are struggling to meet repayments on money you borrowed, it is important that you do not ignore your debt. Speak to the company who loaned you the money and offer to pay less each month until your financial situation improves.
Borrowing more money to pay off existing debts is usually not a good idea as it can often make the situation worse.
You can get professional help from the agencies listed here:
Derby Citizens Advice and Law Centre: advice@citizensadviceandlawcentre.org or telephone: 01332 228700
National Debtline: www.nationaldebtline.co.uk Tel: 0808 808 4000
Consumer Credit Counselling Service: www.cccs.co.uk
Additional information and advice is also available on this website for students who are in financial hardship.
