Money guidance helplines are preparing for a rise in people needing debt advice in early 2021 with a call about debt expected at least every four minutes throughout January at the Money and Pensions Service (MaPS), who are anticipating that debt advice demand will grow this year due to the continued impact of the COVID-19 pandemic.
MaPS, which is the largest single funder of free debt advice in England, forecasts that January 2021 will see debt advice traffic increase to at least the high rate seen in January 2020, and peak the week commencing January 18th, as credit card bills from December arrive before people have received their first pay cheque of the year.
In 2020, MaPS forecasted that the need for debt advice is expected to increase by 60% due to the financial impact of the Covid-19 pandemic. So far, demand for debt advice has not increased, due to support measures like payment holidays and a pause on other credit collection activity. However, MaPS expects that demand for debt advice will increase over the next 12 to 18 months, particularly when support measures come to an end.
While challenging times lie ahead for many people in 2021, steps have been taken to ensure that support is available to people in financial difficulty. An extra £37.8 million in funding from HM Treasury was secured by MaPS to ensure an additional 1 million people in England get debt advice over the next 12 to 18 months, while enhanced money guidance is available to a further 2 million.4 MaPS has also supported the recruitment of an additional 550 debt advisors into the sector to help increase capacity in the face of increased demand for debt advice.
January is often a difficult time of year for some people who are worried about bills piling up after Christmas. This year many are facing additional money pressures as they grapple with the ongoing financial impact of the Covid-19 pandemic.
Although it’s tempting to avoid dealing with money worries we know the sooner you act, the easier it will be. Our research shows three quarters of people who seek help feel more in control after getting debt advice.
We know many people have been helped by the furlough scheme and special flexibility on products such as mortgages and loans, but there are likely to be challenges when these come to an end.
Top tips for tackling your money worries:
- Open up to someone. Talking about money can be challenging because of feelings of shame, embarrassment or not wanting to burden others. However, opening up to someone can be an important first step to help you regain control of your finances. Research has also shown that people who talk about money feel less stressed or anxious and more in control.
- Work out your debts. Write down everything that you owe. This might seem overwhelming but facing up to what you owe will help in the long run.
- Pay debts in the right order. Make sure to pay priority bills and debts such as mortgage, rent and energy payments before secondary debts like overdrafts, personal loans, credit cards and Buy Now Pay Later (BNPL) arrangements. You should pay back BNPL agreements only after paying off any priority debts first.
- Avoid high-cost credit. While it can be tempting to use high-cost credit options like payday loans, if you do need to borrow, then shop around and consider more affordable options like credit unions.
- Set a budget. A good way to understand how much you can afford to pay back each month is to write down what your income is and list all your expenditure.
- Seek professional help quickly if you are struggling with debt as the sooner you act, the easier it will be to manage. You can contact Debt Free Advice for free and impartial advice on 0800 808 5700 - we're open 24/7 throughout January. MaPS data shows 63% of customers with debts are reducing or clearing them within 3-6 months after receiving debt advice.
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