How have rising costs impacted people’s debt – and what can you do about yours?

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<p class="subtitle">StepChange Debt Charity say they’re now supporting more and more people who might never have experienced financial problems before. Here’s what impact the rising cost of living has had on people’s debt situation – and some things you could do if you’re concerned about your own.

What impact is the rising cost of living having on debt?

Increased financial pressures mean people have had to try to make their money stretch further recently. And some have found themselves in debt.

Life has become more expensive lately, with the cost of food, energy and rent all having increased. 

There have also been interest rate hikes. The higher interest rates go, the more money you typically need to pay back on a sum of money you’ve borrowed. So this can make loan repayments more costly. High interest rates have pushed up mortgage costs, for example, meaning more people may have difficulty affording their repayments. For more information on how interest rates can affect mortgages, read our article. 

And if you’re now spending more in your day-to-day life due to high living costs, you could have less money to make debt repayments with.

StepChange Debt Charity report that more of their new clients have cited the cost of living as the main reason for their debt. The charity also say they’ve seen a recent rise in the number of people with credit card debt. And as we’ve mentioned, they note they’re increasingly supporting people who may not have experienced money issues before – a sign that debt can happen to anyone.

Also, between 2021 and 2022, Citizens Advice saw a 19% increase in the number of people going to them with energy debt. 

Debt might become a problem for you if you’re struggling to afford repayments or if you’ve already missed payments.

But the bottom line is this: if you’ve been experiencing debt problems recently, you’re not alone. And there are also some things you can do to potentially improve your situation or give you a bit of reassurance.

Check you’re getting what you’re eligible for

Make sure you’re getting all the government benefits you’re entitled to. You might be able to claim benefits like Universal Credit, Pension Credit, Carer’s Allowance and more.

You can find out how to check what you’re entitled to in our article.

If you do qualify, you could find yourself with more income. This could make it easier for you to afford your outgoings, and it might be money you can put towards paying off your debts. 

The charity Turn2us have a Grants Search tool. You can use it to check if you’re eligible for any charitable grants, which you don’t have to pay back. 

Understand your debt

Some debts will be more urgent than others. MoneyHelper can help you figure out which debts you need to prioritise. 

The Citizens Advice website can also help you understand if you need to pay a debt, and what kind of debts you might not be responsible for. It also discusses different kinds of debts and can help you understand the circumstances in which you should contact your creditors. Do check this, because contacting creditors could be really important and might help your situation. For example, if you’re struggling with mortgage repayments, your lender might come to an agreement with you about how you’ll pay back arrears and how you’ll pay going forward.

Create or review your budget

A budget can’t take away your debt overnight – but it can still be useful. 

Budgeting usually involves pulling together things like payslips, bills, receipts and bank statements. This could help give you a clearer idea of how much debt you have and how much money you’ve got coming in. And this might make it easier to plan for how you’ll reduce your debt going forward. 

You might even spot ways to adjust your spending – which could free up some money to put towards debt repayments.

For more information, read our article about reasons to have a budget.

Putting together a budget can also be useful if you’re planning on seeking debt advice. This is because your debt adviser will likely want to have a full picture of your financial situation.

Get debt advice

If you decide to get debt advice, your adviser will look at your situation and recommend options to help you handle your debt problems. They’ll probably need details about who you owe money to, how much your debts are, and what your income and outgoings are.

You can get free, impartial advice from Citizens Advice in person, online or over the phone. You can also get in touch with National DebtLine and StepChange Debt Charity, both via phone or on the web. And MoneyHelper can point you in the direction of various debt advisers too.

Your adviser should listen to you and support you without any judgement, no matter what your situation is.

More resources and things to know

Overall, there are things you can do that could help reduce your debt. 

If you want practical tips and resources to help you get on top of your finances, visit our support with everyday money worries page.

Talking about money can help you feel less anxious and more in control.

And remember, if your debt is making it difficult for you to cope, helplines like Samaritans can help. They are there day or night, for anyone who’s struggling to cope who needs someone to listen without judgement or pressure. You can call them for free on 116 123.

Wondering what to do about your pension plan?

If you’re worried about debt and you're paying into a pension plan, you might feel tempted to stop or reduce payments into it. But keep in mind you’ll miss out on valuable tax benefits. And you could miss out on employer payments into your plan if you’re in a workplace pension scheme. Stopping or reducing your payments now could potentially mean you end up with less in your pot in the future.

Ultimately, you’ll need to think carefully about what’s best for you. If you’re struggling to keep up with payments into your plan, most plans give you the flexibility to reduce payments or take a payment holiday.

Don’t forget, you can restart payments when the time is right for you – so you can then continue to save for your future in a tax-efficient way. Remember, a pension is an investment. Its value can go down as well as up and may be worth less than was paid in. 

If you think a payment holiday or cutting back on your payments is right for you and you have a Standard Life personal pension plan, go online or give us a call. If you have a workplace pension plan with us, get in touch with your employer to learn more about your options. 

If you decide to stop your payments to free up money for debts or living costs, you could set a reminder for a future date to review whether you’re ready to restart your payments and get the benefits you’re entitled to.

The information here is based on our understanding in May 2023 and shouldn’t be taken as financial advice.

A pension is an investment and its value can go down as well as up and may be worth less than was paid in.

Standard Life accepts no responsibility for information in external websites. These are provided for general information.