Managing your money, debt and your rent

What is the credit crunch? 
A credit crunch can occur for many reasons, such as an increase in interest rates or financial problems.

How is it likely to affect me?
It means that money becomes more difficult to borrow and borrowing becomes more expensive.

Why now?
Over recent years money has been easy to borrow as lenders have been irresponsible in giving out loans, credit and mortgages. This has led to high numbers of people borrowing more than they can afford to pay back. If the money isn’t paid back then lenders lose out, so they either stop lending or increase interest rates.

What about me?
How the crunch affects you depends on your current financial situation and your financial plans. If you currently have credit it is possible you may have to pay a higher rate of interest, credit limits might be reduced or the credit may be claimed back altogether. If you are hoping to borrow in the near future then it might be harder than in recent years, especially if you have a poor credit rating. If you are thinking of applying for a mortgage you may now need a bigger deposit.

But don't panic, there is lots of help out there! 

10 Top tips on how to get out of debt and manage your finances:

1. Don’t ignore debt: make it a priority and deal with it straight away.
   
   
2. Prioritise your debt: consider what is most important to you, such as your home, and concentrate on paying these debts off first.
   
   
3. Don’t ignore letters: make sure you respond to everything you receive from either your creditors or the court. Attend court if asked to, it might stop you from losing your home.
   
   
4. Speak to your creditors: explain your circumstances and how you intend to repay them.
   
   
5. Make a budget and create a financial statement: consider your income and your expenditure, stick to a budget and decide how much of your debt you can afford to repay.
   
   
6. Save money to make money: assess your spending and how you could save money, compare energy and supermarket prices.
   
   
7. Stop borrowing: do not borrow money from illegitimate sources to pay off your debts, as they charge much higher rates of interest and may harass you if you can’t repay the loan.
   
   
8. Check your benefits: make sure you are receiving all the benefits and help that you are entitled to.
   
   
9. It’s good to talk: make the most of the agencies and organisations that are out there to help you. 
   
   
10. Don’t panic and don’t give up!

Home Sweet Home

If the credit crunch has left you with unmanageable debts one of the most important steps to take is to prioritise by considering what you feel is most important to you, and this is likely to be your home. So, to make sure you do not lose your home it is extremely important you do not get into rent arrears during this tricky financial period.

If you are struggling to pay your rent or worried about getting into arrears, simply contact your local housing office where the staff will be more than happy to discuss your financial situation and help you get back on track.

If you are in deep water: watch out for the sharks!

If the credit crunch has made it impossible for you to get credit don’t be tempted by doorstep lenders.
The majority of doorstep lenders are illegal, unlicensed and unregulated; typically called ‘loan sharks’.  Loan sharks charge a very high rate of interest and may use force to collect money owed to them. People who lend from loan sharks commonly end up even deeper in debt.

Visit http://campaigns.direct.gov.uk/stoploansharks/ for advice about loan sharks and for details of how to report illegal money lenders in confidence.

What’s the alternative?

An excellent alternative is to become a member of a credit union. Credit unions are owned by their members and run by their members, they are there to help! The unions help you to save and once you have become a reliable saver, you can borrow money at extremely reasonable rates and feel safe and secure knowing that you have borrowed from a legitimate and regulated lender.  Visit Managing your money - Credit Unions to find out more.

Who can help?

There are lots of agencies and organisations out there to help you with your finances, whether it’s simply explaining financial issues or assisting you at court.  Visit Managing your money - useful links and contacts.