November can only mean one thing… it is time for Talk Money Week! This year, the theme for Talk Money Week is ‘Credit’. Let’s dive into what this week is all about and how we can become more open talking about credit and debts.
What is Talk Money Week?
Founded by the Money and Pensions Service, Talk Money Week happens every November and offers an opportunity for people to begin speaking openly about their financial situation. As the cost of living crisis has impacted almost all households in the UK, this week is more important than ever. Those who have struggled with financial difficulties this year can utilise the tools provided by this week to talk to friends, family and partners about finances to seek the help and support on offer to them.
Chat about credit
Each year, the Money and Pensions Service chooses an area of money to focus on and this year, the theme is credit.
Credit is defined as a way of borrowing money on the understanding that you will pay it back. When you do pay this money back, it is often the case that interest will be added on. The repayment terms also differ depending on your creditor (the person or organisation who has lent you the money).
Credit and the cost of living
As mentioned above, the cost of living crisis has affected homes across the UK (and indeed the world) meaning more and more people are turning to credit options. In July 2022, the Consumer Price Index rose to 10%, meaning more people were struggling to afford basic necessities such as food or their energy bills. Because of this, credit card borrowing in July rose at its fastest rate since 2005. Predictions from the Smart Money People also show that two in five UK adults will take out a new form of credit each year, averaging £5,250 each.
Buy Now Pay Later options have risen in popularity in recent years. Advertised as being interest free, they appear to be the perfect solution when you are in a squeeze. The option to Buy Now Pay Later has become commonplace amongst many retailers, especially online. Some grocery shops and fast food restaurants also now offer the credit at checkouts. Charity StepChange found that 36% of consumers found BNPL more attractive due to the rising cost of living crisis. However, many shoppers do not understand the dangers that BNPL can bring.
Credit and debt
If you have sought credit options to help pay your bills and are unable to afford the repayment amount, you could have found yourself in debt.
Depending on your creditor, this could be a priority debt, meaning it is essential you pay this off before any others you may have. Priority debts include council tax, mortgage or rent, utilities and income tax, amongst many others.
When in debt, there are a few debt solutions that you could be eligible to apply for. The two most common being Debt Management Plans and Individual Voluntary Arrangements:
Debt Management Plans
A Debt Management Plan (or DMP for short) is a flexible solution to repaying your debts. You would begin by creating a budget, listing all your essential outgoings. Whatever is left over is your ‘Disposable Income’ and will be used to repay your debts.
Individual Voluntary Arrangements
Individual Voluntary Arrangements (IVA) on the other hand are a more formal legally binding contract. It enables you to ‘freeze’ your current debts whilst you pay them off over a set period of time. Any money owed after this period of time is often written off.
Credit and free debt advice
Did you know that before agreeing to any formal debt solution, you must have received professional debt advice? Our debt advice tool is free to use, with no-obligation to sign up with us. 100% online, our tool only requires you to input your current financial information and will use this to determine the best solution for you. No need for a phone call, meeting or lengthy process.