What to do when struggling with debt and you can’t make your repayments

Being able to pay your bills should always be one of your top priorities when it comes to everyday money matters and personal finance.

However, life happens and unforeseen circumstances, such as losing a job, relationship breakdown, becoming ill or having a large, unexpected cost wipe out savings can happen. There are also some people who don’t budget well or use a budget at all, which is why they may end up short of money when bills are due.

Whatever your situation, a first step is to create a detailed budget to understand where your money is going. Having clarity on your finances is the only way to stay in control of your money and not the other way around.
If you know you can’t make your next repayment, contact your creditors in advance – the earlier the better – and explain why you have or are about to default.

 
Do everything you can to get some money together and get back up to date, including working overtime, selling items or investigating other ways to boost your income.

It’s normal to be nervous about telling your bank, but remember you’re not the first person to go through this and, believe it or not, lenders can be understanding.

Through what are known as hardship programs, most lenders will help you to come up with a plan to make up the repayment and get back on track.

This might include delaying or reducing your repayments for a period of time.

If you’ve missed a repayment, it’s vital to fix the situation as soon as possible to avoid fees and charges and damage to your credit rating.

If you have the appropriate insurance, you may also be able to claim on that to make up the missed repayments. Getting on top of the problem straightaway will also ensure it doesn’t get so out of control that you end up months in arrears.
If you continually miss repayments the worst-case scenario is that you could lose your home.

 
If you want to avoid missing your mortgage repayment and flagging yourself with the bank, you can try to borrow money from someone. However, this can end up being a slippery slope, so only do it if you can commit 100 per cent to paying it back.
Once you have missed a repayment, you should do everything you can to get some money together and get back up to date, including working overtime, selling items or investigating other ways to boost your income.

Refrain from buying anything that isn’t a necessity until you get back on track and, ideally, also have a cash buffer in case of emergencies.

You might also think about refinancing and extending the life of your loan to make repayments smaller. The last resort would be selling your home, and either buying something cheaper or renting.