If your bills are mounting and your overdraft’s creaking at the seams, would you turn to your bank for help? My immediate instinct would be to say ‘no way’, but my logical response is ‘yes, of course you should’.
It’s 18 months since the recession was officially declared over and still this difficult economic environment persists.
So there’s a bunch of people in this country struggling with their finances, whether it’s the mortgage, rent or debt – so when you’re in need, who should and who shouldn’t you go to for help?
Who shouldn’t you go to?
A debt management company: The TV adverts may offer a smiling face and soothing words, but these companies are in it for a profit. If you’re struggling to repay your debts, the last thing you want to do is pay a chunk of the money you do have to a company offering a service that is available free (and better) elsewhere.
A claims management company: If you’ve been mis-sold Payment Protection Insurance (PPI) and think you’re due a refund that would pay off some debt, a claims management company could take a third of your refund in fees. This is a waste of money when you can put in a claim yourself using the free Which? PPI claim tool.
Payday loan providers: While there may be some circumstances when a payday loan can help you bridge a very short-term cash flow problem, they’re never a solution to problem debt. Yes, they may get your creditors off your back for a few weeks, but then you’re stuck with an additional debt with an APR in the hundreds of per cent.
Who should you go to?
A free debt advice organisation: The word ‘debt’ might be putting you off, but it’s much easier for organisations like Citizens Advice to help you before things get too serious. You don’t have to have missed payments to contact an organisation such as Citizens Advice, National Debtline, Consumer Credit Counselling Service and Payplan – their advice is unbiased, independent and free.
Which? Money Helpline: If you’re a Which? member, you get free access to our Money experts – you’ll find the phone number in your latest magazine. They can offer help with anything from tax, debt help and finding the best ways to borrow, to maximising your income from your pension and savings.
The government: The Directgov website has a great online tool that lets you check which benefits you might be entitled to. You can also get advice from your local Jobcentre Plus or by phone. If you’re entitled to it, claim it.
Your bank and lenders: I regularly hear anecdotal evidence from people struggling with their finances who don’t contact their bank. There is an understandable fear that notifying your bank will set off alarm bells, leading to the withdrawal of credit, making your problems even worse.
And yet, lenders may give you a payment holiday or extend an authorised overdraft facility. Keeping them in the dark will only lead to penalty fees, further damage to your credit score, debt collection agencies and, at worst, the potential loss of your home. Banks have a duty to treat struggling customers fairly – if you can’t pay, it’s in the interest of both your and your bank to agree a repayment plan.
If your lenders won’t play ball, put in a formal complaint and, if necessary, take the matter to the Financial Ombudsman Service. But, in short, keep your bank informed.
Who would you turn to for advice and help? What are your experiences with your bank when times have been hard? And who would you add to each of the lists above?