Christmas is coming. But while it’s meant to be joyous, for some that’s ruined by financial stress and debt worries. Our Money Saving Expert Martin Lewis is here to try to relieve some of that.
Martin’s DON’T PANIC full step-by-step debt help guide
StepChange Debt Charity
Christians Against Poverty
Crisis loan application and info
Budgeting loan application and info
The big new form of lending is payday loans – yet the rates are astronomical. Can they ever be any good?
In general payday loans – which are short-term loans – should be avoided like a bargepole. Interest rates are commonly anything from 1,000% to 5,000% APR.
Now in a way, that’s meaningless as an APR is interest over a year, while these are supposedly repaid in a short time, so it’s not actually as expensive. Yet the real problem is many people who get payday loans are not in the position to repay them. Or worse, they’re encouraged to roll them over by the payday lenders.
To anyone thinking of getting one, I’d suggest you ask yourself why you think you’ll have the money when it comes time to repay, if you don’t have it now. If you’re not sure you will – do not do this type of borrowing, it’s a nightmare. And even if you are, question whether there are any cheaper alternatives.
If payday loans are no good, what’s the best way to borrow for Christmas?
Look, I think Christmas borrowing is a bad idea. It’s just one day, and it’s far better to go cold turkey (sorry) on your spending to ensure you have a happy, debt-free new year, rather than a merry Christmas. Yet if you really feel you need to borrow right now...
Do you have a credit card? If so, PROVIDED you can repay all you owe in full in January, if you use it now, then it’s interest-free borrowing. As long as you clear the card on your next statement, you won’t pay interest on almost every card.
Of course if you have a 0% for spending credit card (too late now to apply for one for Christmas if you don’t already), then that would allow you to spread the cost at no cost.
Speak to your local credit union. Credit unions are local non-profit savings and loan co-operatives. There are many of them, so it’s worth finding out if you’ve got one near you. It may be able to lend you some money at a decent rate.
Got an emergency? There are two types of Government-financed interest-free loans. ‘Crisis loans’ for emergencies or disasters, and to help stop serious damage or risk to you or your family's health and safety. And ‘budgeting loans’, which are only for benefit recipients, but allow a wider range of borrowing; for instance to pay for clothes and furnishings. Both of these are applied for via the Job Centre –though how much you’ll get will depend on any savings you have.
I’m not sleeping, I’m really worried about my debt and getting through Christmas, what can I do?
Firstly, don’t panic – but don’t spend any more. It’s far more important to keep afloat and a roof over your head (and your children’s) than to be buying presents or having the perfect Christmas.
Next, consider making an appointment with one of the non-profit debt counselling agencies. These include the StepChange Debt Charity (which used to be called the Consumer Credit Counselling Service), Citizens Advice and National Debtline. It’s better to do it now, before you build up any problems with Christmas, and also because they get very busy in January.
Finally, if you’re not just struggling with the finances, but the stress and knock-on effects of debt, talk to Christians Against Poverty – a debt counselling agency that can spend more time with those really hurting emotionally.
My final message is simple. Many people feel their debts are insolvable. Yet as long as I’ve been doing my job, I’ve never once seen a debt case that isn’t solvable.
It’s not always easy or quick, but there is always a path. Don’t give up.