This page explains about different types of debts you may have and what you can do about them. A Welfare Adviser will be able to assess your individual circumstances and advise you on the best options for dealing with your debt issue, which might include referring you to a specialist debt advice agency.
Many people are in debt, which basically means that they owe money. This happens for many reasons, depending on people’s individual circumstances, but essentially because their income is less than the amount they spend. Sometimes this is because people spend money on non essential items, but often it is because their income is too low to pay for all of their essential costs, like rent, food and bills.
People can also get into debt because they forget to notify organisations such as Student Finance England or welfare benefit agencies of a relevant change in their circumstances, which means they might be paid more money than they should be. Once the organisation realises it has overpaid someone, it usually takes the money back, often without warning, which can lead to the person falling into debt.
Personal finances and mental health often have a strong impact on each other. If you are struggling to keep control of your money, you may find that your mental health is affected. Likewise, if you find that you cannot cope with your feelings or behaviour, you may find that you get into financial difficulties.
The mental health charity MIND has some useful web pages which can help you to understand more about how mental health issues can affect your finances, as well providing helpful tips for taking control of your money.
The Money Saving Expert website also has a free downloadable guide to dealing with debt for people with a mental health condition. This guide has been written to help people with mental health conditions understand how this can impact on their financial situation, and also how being in debt can lead to mental health issues. The guide explains some practical steps that you can take to improve your financial situation.
You are also advised to get advice and support from a Welfare Adviser at the Advice and Counselling Service (see section below 'How can a Welfare Adviser help me').
Student Finance and student specific loans
It is a reality that most students will need to borrow money to fund their studies. Some people think that all debt is “bad”, but in fact some types of debt are preferable to others.
As a student you can usually borrow money specifically to fund your studies at preferable interest rates. Government maintenance loans to fund undergraduate study only become repayable after you have completed your course and when you are earning a minimum of £21,000 a year (or £17,335 a year if you started your course before 2012), so this is a debt which you won’t have to worry about too much while you are studying. The Government has also introduced a Postgraduate Loans Scheme available to students starting courses from 2016, where repayments start on completion of your course on minimum earnings of £21,000 per year, and there are plans to introduce a separate scheme to help fund the cost of research degrees. In addition, there are currently study specific loans that some (mainly postgraduate) students can apply for, such as Professional and Career Development Loans, which only become repayable after course completion. An interest free overdraft on a student bank account can be another useful source of borrowing. See Undergraduate funding or Postgraduate funding for more information.
Tuition fee debts
If you owe money to Queen Mary University for your tuition fees and cannot pay what you owe by the required deadline, you will usually be de-registered from your course, unless there are other options available to you, such as interrupting your studies. If you are de-registered from your course, this means you will no longer be a Queen Mary University student, so you would not be able to progress your studies, eg. to the next year of study or graduate or receive your degree. For more advice about tuition fees, de-registration and interrupting your studies, see the Resitting, Interrupting, Leaving your course advice guides for home and international students.
Other debts to the University
If you can pay your tuition fees by the deadline, but you owe other money to the University such as Queen Mary University halls accommodation fees, you should still be able to progress your studies and graduate with your award. Contact a Welfare Adviser if you need advice about managing your debts to the University.
Short term loans
Payday loans are short term loans, usually lent for a period of a few days or weeks. They can be easy to obtain, which makes them dangerous, as you might take one out without properly considering the consequences. Payday loans tend to have a fixed fee attached to them, rather than an interest rate (as a loan or a credit card would have). Typically a £100 loan, taken out for one month, will attract a fee of £25. This means that, despite new rules introduced in January 2015, including that borrowers must never have to pay back more in fees and interest than the amount borrowed, payday loans are still a very expensive form of borrowing, as the fee is very high compared to the amount you have actually borrowed.
Payday loans should be avoided if at all possible, and you certainly shouldn't take out a payday loan if you are not 100% sure that you will be able to repay it on the due date. If you cannot make the repayment, the fee you incur will increase substantially. Many people end up taking more payday loans to repay existing payday loans, and get into an unmanageable spiral of debt, which negatively affects their credit rating and their ability to obtain credit in the future.
Another form of short term borrowing is from Loan Sharks. These should be avoided as they are unlicensed lending companies, who often go door to door to try and persuade people to borrow money from them. They are known to use illegal methods to ensure that customers repay their debts, including violence. If you know of loan sharks, you can report them on 0300 555 2222, or text LOAN SHARK and the lender's details to 60003, or email firstname.lastname@example.org.
If you are running out of money, contact a Welfare Adviser in the Advice and Counselling Service. They will help you to explore all of the options available to you for increasing your income, rather than taking out short term loans which you may be unable to repay.
If you owe short term loans and you cannot manage the repayments, contact a Welfare Adviser for help understanding your options.
Longer term loans
This type of borrowing includes credit cards, store cards, and non student specific bank loans. These usually have high interest rates and are repayable on a monthly basis while you are still a student, therefore it is likely that you will struggle to afford repayments. If you already have debts on which you cannot afford the monthly repayments, you need to take action - see below.
If you are running out of money, contact a Welfare Adviser in the Advice and Counselling Service. They will help you to explore all of the options available to you for increasing your income, before you take out credit which you may be unable to repay.
If you have debts which you are unable to manage, for example credit card repayments which you cannot afford, or rent arrears or council tax arrears, contact us to make an appointment with a Welfare Adviser. If you ignore these debts they can very quickly get out of control. If you are in rent arrears you could lose your home. If you have council tax arrears, the local authority could send enforcement agents (previously known as bailiffs) to visit your home and remove your possessions. If you miss repayments on credit cards, or pay late, charges are often added to your debt, and this higher balance will increase the amount of interest you pay. Defaulting on repayment agreements can affect your credit rating, which would make it harder for you to get credit in the future, such as a mortgage.
Do not ignore unmanageable debts: the problem will not just go away.Contact a Welfare Adviser as early as possible, however it is never too late to seek advice and something can usually be done to improve your situation. If you prefer, you can choose to contact the organisation you owe money to yourself - see the guidance on creditor negotiation below. However, many creditors often take their customers more seriously when they have contacted a specialist for debt advice.
If you have a mental health condition, also see the section above on 'Debt and mental health'.
You can book a one to one confidential appointment to see a Welfare Adviser. Sometimes people feel embarrassed about being in debt, but your Welfare Adviser will be completely non judgemental. They will identify and explain what options are available to you for dealing with your debt, which may include referring you to a specialist debt advice agency if you have multiple debts or if you owe a large amount of money - see the 'Getting debt advice outside QMUL section' below for a list of agencies. Specialist agencies may be able to negotiate with creditors directly on your behalf, or suggest other options which may be more suitable, depending on your individual circumstances. If you decide you would like to try and renegotiate the amounts you repay your creditors yourself, see the sections below which outline the steps you will need to take. A Welfare Adviser can explain these to you in an appointment. Note that you can only renegotiate your repayments where you are no longer using the credit.
Creditor negotiation usually involves the following steps:
1. Maximise your income
A Welfare Adviser can help you check that you are getting all of the income that you are entitled to, and help you apply for any additional funding you are eligible for, including any Hardship Funds. See Undergraduate funding or Postgraduate funding for more information about funding options.It may be that you are eligible for some money that you did not know about, for example you may have been incorrectly assessed for less student financial support than you are eligible for, or less Housing Benefit.
2. Confirm the debts
To deal with your debts effectively you need to include all of your creditors in the negotiation process. It must be clear to all of the creditors that they are being treated fairly and equally, not that you cannot afford to pay one of them because you have given your available income to another. A Welfare Adviser will need to see the most recent statement or letter from each of your creditors to get a complete picture of your financial situation.
The Welfare Adviser can help you to check that the figures are correct, for example, that any payments you have already made have been deducted from the total amount owed. They can also check that you are liable for the debt, for example that no-one else was jointly liable, or that the time limit for the creditor recovering the debt has not passed.
3. Draft a financial statement
A Welfare Adviser can help you to draw up a realistic financial statement showing your income and expenditure. This will help you to see whether you have any money available each month to make payments to your creditors. If you are worried that you are spending more money than you can afford to, a Welfare Adviser can help you to try and identify ways of saving money.
You can use the National Debtline online budget planner to help you work out your monthly budget, and you can then print this as your financial statement to send to your creditors.
If your financial statement shows that you have no spare money available to repay your creditors, some options are explained on the National Debtline website. You can also discuss these with a Welfare Adviser.
4. Separate priority and non-priority creditors
Creditors are distinguished as priority or non-priority in accordance with the different sanctions available to them if you do not repay your debt. Any available income should first be paid to priority creditors.
Priority creditors have powers to impose more serious sanctions, although they would usually need to go to court to get permission to apply these. Sanctions include imprisonment, eviction, sending bailiffs to remove your possessions, or cutting off your fuel supply. Debts to priority creditors are typically for rent, mortgage, council tax, and utilities. There is a full list on the National Debtline website.
These have no special powers to impose sanctions. To enforce payment they would need to sue a debtor through the county courts. A court would look at the debtors ability to pay, based on their financial statement. Debts to non-priority creditors are typically for credit cards, payday / bank / personal loans, catalogues, store cards etc. There is a full list on the National Debtline website.
5. Calculate repayment amounts
If your financial statement shows that you have any available income, this should first be apportioned among any priority creditors. Any remaining available income can be apportioned among non-priority creditors.
It is very important that all your creditors in each group (priority and non priority) feel that they are being treated equally and given their fair share of any available income. There is a standard calculation which is used to apportion available income between all of the creditors, so that the creditor you owe the most money to gets the largest share. This will be calculated when you complete the National Debtline online budget planner.
When you have calculated the offers to each creditor, total them up to make sure they equal the total amount of money you have available each month.
If your financial statement shows that you have no spare money available to repay your creditors, some options are explained on the National Debtline website. You can also discuss these with a Welfare Adviser.
6. Write to your creditors
You will need to write to each of your creditors explaining your repayment offer, and attach your financial statement. There are sample letters on the National Debtline website, which you can personalise: see the list of letters under the heading 'negotiating with your creditors'. If you have any exceptional circumstances or compelling reasons why you can no longer afford the agreed repayments, for example you are currently unable to work due to illness, you should explain this. A Welfare Adviser can check your letters and can usually write a letter in support of your case for you to send to your creditors too.
Keep copies of all correspondence between you and your creditors. Send any letters to them using Special Delivery or Recorded Delivery mail, so that you have proof that the creditor received them.
7. Reduce payments in line with your offer
Once you have made an offer of a reduced monthly repayment amount, it is usually helpful to change your monthly repayment to the new amount, without waiting for your creditors to approve this. If you continue to pay the higher amount that was originally agreed, often a creditor will assume that this means you can afford to, and so they won’t agree to your reduced offer. However, reducing the amount you pay below the amount agreed with your creditor can negatively affect your credit rating, but it is likely that you are reducing your payments because you were already defaulting on your agreed payments, which may also affect your credit rating. A Welfare Adviser can advise you about this.
8. Follow up
If you have not had any response from your creditor two weeks after they would have received your letter, call them. Ask them to confirm receipt of your letter, and whether they have accepted your offer. If they have accepted it, ask them to confirm this in writing. If they are still considering your offer, find out when they will make a decision, and call back at that time. If your creditor says they have accepted your offer but will not freeze the interest, or if they have decided not to accept your offer, see below.
If a creditor refuses to accept your offer, you need to write to them again, asking them to reconsider. In your letter you will need to:
- Explain your circumstances again and that your offer is reasonable and all you can afford. Enclose your financial statement
- Tell them if any of your other creditors have accepted your offers, and include copies of letters from other creditors showing this
- Explain that you are unable to increase your offer of payment to this creditor without changing the arrangements you have made with other creditors, which would mean treating other creditors less fairly
Keep making your monthly repayments at the reduced amount you are offering.
If the creditor still won’t accept your offer, do not give up. Keep paying the amounts you have offered, otherwise you won’t have enough money to pay for your essential costs such as rent, food and bills.
You will find useful information about your options in the National Debtline factsheet 'Payment offer - what to do if a creditor refuses', including a sample letter to send to your creditors. Contact a Welfare Adviser if you need help with this. If you are unhappy with the way your creditor has dealt with your offer, there are ways of complaining - some options are explained on page two of National Debtline factsheet.
You might feel that a creditor is treating you unfairly and using inappropriate methods to try and get you to repay the debt. While creditors or their agents are allowed to take ‘reasonable’ action to try and recover a debt, it is a criminal offence to harass people in debt. The FCA (Financial Conduct Authority) Consumer Credit sourcebook must be followed by all companies which offer some form of credit to consumers. They must be authorised by the FCA. You can use the Consumer Credit sourcebook to help you make a complaint to your creditor. You can also use it when making a complaint to the Financial Ombudsman Service.
The National Debtline website has a factsheet on 'Harassment by Debt Collectors and Creditors'. This explains what constitutes harrassment and how to deal with it.
If you feel you are being harassed, keep a diary of all the dates and times that the creditor contacts you, what method they used, and if possible, the name of the person who called you. Keep copies of all correspondence sent by your creditor. You need to complain in writing to your creditor about their behaviour. There is a sample letter in the National Debtline 'Harassment by Debt Collectors and Creditors' factsheet. A Welfare Adviser can help you with this. You can also inform the Financial Conduct Authority and complain to the Financial Ombudsman Service.
You can read more about what action creditors can take, and what they aren't allowed to do, on the Money Aware website.
Your creditor might write to tell you that unless you pay what you owe, they will send Enforcement Agents (previously called Bailiffs) to your house to take your possessions. Do not ignore a letter like this. If Enforcement Agents come to your house, a fee can be added to your debt. Make an appointment with a Welfare Adviser to discuss your options urgently.
You are entitled to get at least a week’s notice before the first visit from an Enforcement Agent. And when they come they are required to leave a letter explaining clearly what they’ve done.
If Enforcement Agents do knock on your door, they cannot normally force entry to your home, put their foot in the door or push past you to get in. Enforcement Agents can only enter your house if an adult admits them to the house (They are not allowed to come in if only children or vulnerable adults are in the house). The only circumstances when they can use force to enter is when they’re collecting criminal fines or tax debts from HM Revenue & Customs, but they must ask a judge for permission first. Also, if an Enforcement Agent has already been into your house and made a list of goods, they can use force to enter again if you don’t pay them. However, Enforcement Agents can also seize belongings from outside your home, if they are sure they belong to you, including taking your car from the street outside your house, unless the car is needed for a disabled person to get around.
If Enforcement agents come into your home, they will make a list of your goods. They have the power to take them straight away, but they’re very unlikely to do this. Instead they’ll make an agreement to leave the goods with you as long as you make payments to the debt, which is called a ‘controlled goods agreement’. If you don't keep up payments to the debt, then Enforcement Agents can return and take any goods you own, including those you own jointly with someone else. But they must leave essential household goods, and there’s a list of items exempted from the list, such as your fridge, phone, microwave and washing machine. Items needed to care for children, disabled and older people can no longer be taken, and there’s protection for items used for studying.
Enforcement Agents can charge a fee. There are two different fees, depending on the type of debt.
There is information about Enforcement Agents and what to do if you are visited by them on the Citizens Advice Bureau website.
If you would prefer to get debt advice externally, you should look for an independent not for profit organisation. You can find a list of agencies on the Money Saving Expert website. If you contact a Welfare Adviser at the Advice and Counselling Service about your debts, and if you have multiple debts of a high amount of money, the Welfare Adviser may suggest you get advice from one of these external agencies about your options, due to the complexity of your situation. However, it is still very worthwhile contacting a Welfare Adviser, as they will be able to advise you on other aspects of your situation, such as maximising your income.