Dealing with debt can be challenging under any circumstances, but it becomes especially daunting when you have little to no income. In this blog, we will discuss practical steps and resources to help you manage debt in the UK when your income is limited.
Assess your financial situation
Before you can tackle your debt, it’s essential to have a clear understanding of your financial situation. Make a list of all your debts, including the outstanding balance, interest rates, and minimum payments. Also, list all your expenses and any sources of income, no matter how small. This will give you a clearer picture of your finances and help you identify areas where you can cut costs.
Prioritize your debts
Not all debts are created equal, and some should be addressed before others. Prioritize your debts based on their urgency and consequences if left unpaid. For example, focus on paying your rent or mortgage, utility bills, and council tax first, as failing to pay these can have severe repercussions, such as losing your home or facing legal action.
Seek government assistance
If you’re struggling with little to no income, you may be eligible for various government benefits and support programs. Some of these include:
Universal Credit
A benefit payment for those who are unemployed or on low incomes.
Council Tax Reduction
You may qualify for a reduction in your Council Tax bill if you’re on a low income or receive benefits.
Housing Benefit
This can help cover the cost of rent for those on low incomes or receiving benefits.
Contact your creditors
Reach out to your creditors and explain your financial situation. Many creditors are willing to work with you to create a manageable repayment plan or freeze interest and charges temporarily. Open communication is key, as it shows your creditors that you’re committed to repaying your debts.
Explore debt solutions
Several debt solutions are available in the UK for people with limited income, including:
Debt Relief Order (DRO)
Suitable for those with unsecured debts of less than £20,000 and minimal assets, a DRO can write off your debts after 12 months.
Debt Management Plan (DMP)
A DMP is an informal agreement with your creditors to repay your debts at a reduced, affordable rate.
Individual Voluntary Arrangement (IVA)
An IVA is a legally binding agreement to repay a portion of your debt over a specified period, usually 5-6 years.