Page last updated at 10:44 GMT, Tuesday, 4 October 2005 11:44 UK

Golden debt rules

By Meg Van Rooyen
National Debtline

Meg Van Rooyen of National Debtline
Meg Van Rooyen, National Debtline

People who are in debt are already under considerable pressure, but they can exacerbate their problems by falling into traps while trying to deal with their debt problem.

By following some simple rules, people in debt can minimise the distress they face.

An adviser from a leading indepedent free debt helpline gives her golden rules for dealing with debt and steering clear of the pitfalls

1. Be wary of borrowing more money

Don't borrow money to pay off your debts without thinking carefully. Get advice first.

You should be particularly wary of taking out a loan secured on your house to consolidate the debts you already have.

If you turn unsecured loans into a mortgage you could lose your house if you don't keep up the payments.

Consolidation loans mean borrowing more money, over a longer period and will mean more interest to pay. This could make your situation worse in the long run.

2. Don't ignore the problem

It won't go away and the longer you leave it, the worse it gets.

National Debtline is a national telephone helpline for people with debt problems
The service provides self-help advice to callers and also provides information booklets and factsheets, as well as assisting callers with the setting up of Debt Management Plans

Get in touch with your creditors straight away and explain your difficulties.

Explain your situation in writing and back it up with a detailed personal budget outlining your income and outgoings and showing your creditors how much you can afford to pay them every month.

Contact everyone you owe money to. If you make arrangements to pay some creditors but not others, you could run into difficulties again.

If the first person you deal with is unhelpful, ask to speak to someone more senior who may be able to agree to your offer of payment.

3. Adopt a wise strategy

Make sure you tackle your priority debts first.

Priority debts are those that could lead to you losing your home, being evicted, having your gas or electricity cut off, or lead to fines.

This means you should make sure you have made arrangements to pay your essential household bills such as your mortgage or rent, loans secured on your home, council tax and utilities before making offers to pay unsecured credit debts.

Your debt situation may get a lot worse if you miss payments on your mortgage to keep up to date with a credit card.

4. Maximise your income

Make sure you are claiming all the benefits you are able to: Could you claim Tax Credits? Are you sick or have a disability?

Contact your council to see if it has a welfare rights office
Local law centres often offer benefits advice (see Lawcentres link on right)
If you are over 60, contact your local Help the Aged, Pension Service or Age Concern office
Age Concern's information line: 0800 00 99 66; Help the Aged's Seniorline: 0808 800 6565; (0808 808 7575 Northern Ireland); The Pension Service's website or Department for Work and Pensions website
Tax credits are administered by the Inland Revenue: 0845 300 3900 (Great Britain); 0845 603 2000 (Northern Ireland)
British Gas Warm-a-life scheme offers benefit checks and energy saving tips free of charge to people living in privately owned or privately rented houses in receipt of income related benefits (not just British Gas customers): 0845 605 2535
Locate a local advice service in your area through Advice UK website or the Community Legal Service website (CLS Direct - see link on right)

If you are on a low income you may be able to claim a rebate on your rent and council tax.

Contact an independent welfare rights agency for advice and a benefits check(see information box for more details).

If you have lost your job, or are off work because of illness, check whether your payments were covered by payment protection insurance. Contact the credit company if you are not sure.

Make sure all adults in your household are contributing to the household bills.

Check with the Inland Revenue that your tax code is correct for your circumstances.

You may also be able to save money by switching to better deals on a range of goods and services.

5. Speak to an independent free advice service

Be very careful before entering into any sort of debt management programme with a company that will charge you for sorting out your debts.

Free debt management plans are available which means that all the money you can afford to pay goes on paying your debts back instead of on monthly fees.

Contact National Debtline on 0808 808 4000 for more help. We are a free service.

You can also go and see a local advice agency such as a Citizens Advice Bureau or one of Advice UK's money advice centres. Visit their websites for more details about how to contact local offices (see website links on right).

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.

The BBC is not responsible for the content of external internet sites

Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit


Americas Africa Europe Middle East South Asia Asia Pacific