How To Break The Cycle of Debt
January 2017

We understand that it can be overwhelming when you’re struggling with debt, but don’t despair – getting out of debt is possible. It might not be quick or easy but no debt problems are unsolvable & the earlier you deal with them, the easier they are to deal with. While it takes commitment & effort you can become debt free if you follow the correct steps.

Talk to Someone

Debt can be an agonising position to be in and the worst thing to do is try to avoid it or hide it. As the old saying goes a problem shared is a problem halved – so talk to someone, whether it’s a family member or friend or a professional that can help. It’s a good step to also be open with your lender when you think you’re going to miss a payment rather than just default or miss payments. Once you are open & honest about the situation things are likely to feel a lot better.

Create A Repayment Plan

The first step here is to sit down with your past bank statements & list all of your income, including any benefits. Then compile a full list of your outgoings, it’s important to be realistic when doing this & not only plan for regular monthly outgoings but also for unexpected and irregular outgoings e.g. MOT, TV license, quarterly bills. By doing this it will make it clearer how much money is needed for household bills and living expenses and what disposable income you have to help you create a realistic repayment plan to pay back your debt.

There is a handy budgeting tool on the Citizen’s Advice Bureau website to help you with this stage.

Set Budgets

When you’re trying to take control of your finances setting budgets is essential so you can have a handle on what you’re spending. After calculating how much of your income needs to be spent on household bills & essential living expenses you can then start to see where you can cut back and set yourself budgets to avoid overspending. Keep in mind to budget for expenses that might only happen once or a few times a year and put away a little each month so you’re prepared when the bill comes through the door.

Shop Around

Make sure you’re getting the best deals possible to make your money go further and only buy what is essential. Being a smart consumer is a great way to get your finances back on track.

Get Free Professional Help

If you’re needing more guidance look for a non-profit debt counselling service which will provide a one-to-one session with someone paid to help you, not to make money out of you. Be careful not to confuse this with ‘free help’: many commercial companies say they’re free as you’re not charged directly, but you’ll still pay somehow. Counsellors from non-profit debt counselling services can help you in a variety of ways:

  • Negotiating with creditors to freeze your interest
  • Place you on a Debt Payment Programme (DPP) which they negotiate with your creditors - DAS is a Scottish government run debt management tool which allows someone to repay their debts through a debt payment programme (DPP)
  • And if needed, point you towards a Trust Deed or bankruptcy

Their job is to show you how to prioritise your debt to allow you to still be able to afford the essentials. They don’t judge, they’re just there to help you get your finances back on track.

Here are some of the not for profit debt counselling services available as well as other useful links:

Debt Arrangement Scheme (DAS)
Money Advice Scotland
Citizen’s Advice Scotland
StepChange Debt Charity
Scotland’s Financial Health Service
National Debtline Scotland
Business Debtline