Borrowing to pay the food bill? Debt management could be the answer
7 May 2013
By James Falla (about the author)
The Which? survey released over the weekend found that 20% of all UK families have to resort to either using their savings or borrowing more to pay for their food shopping.
Although shocking the findings are not surprising. The cost of living in the UK including essentials such as fuel and food has been rising relentlessly over the past few years at a time when incomes have largely remained static or have actually fallen in real terms.
If you find yourself in the situation where you cannot afford to pay for the weekly shopping without borrowing more, you need to act. The situation will continue to get worse unless you do something to break this vicious cycle.
One of the things that you need to look at is the possibility of a debt management solution. This will reduce the payments you are making to your current debts thus freeing up the cash you need to pay for essentials like food without having to keep borrowing more.
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What options do you have if you are borrowing to pay for food.
If you find yourself having to borrow to pay for everyday essentials such as the weekly shopping, it can often seem like there is simply no other way out.
It is unrealistic to expect that you will be able increase your income in the short term and so supplementing your income with a credit card, overdraft or even a payday loan can seem like the only option. The survey by Which? has revealed that you are not alone and quite literally thousands of people are in the same situation. Which? suggest that this could be up to 5 million families in the UK.
The problem with continuing to borrow more however is that gradually the amount of debt you have will become bigger and bigger. Eventually you will be unable to maintain your minimum payments and you will be in financial crisis which can lead to huge stress, relationship and health issues.
Clearly a sensible option to avoid having to borrow more is to reduce the outgoings you have already got. Again this is often not realistic as you have already cut back. If this is the case then the area you need to look at is debt management - reducing the payments on the debts you already have.
Using debt management to break the debt cycle
The most commonly used debt management solutions are the DMP (Debt Management Plan) and IVA (Individual Voluntary Arrangement).
Both of these solutions are different and have different implications. However they are the same in the fact that they allow you to turn a debt problem on its head. Once implemented they allow you repay back your debts based on what you can afford to repay each month rather than what you should pay.
They allow you to budget your income so you have enough to pay for your expenses such as food and bills before worrying about debt repayments. The amount you have left after all of your reasonable living expenses are accounted for is used to pay your debts.
In this way your debt payments can be significantly reduced leaving you in a position where you no longer have to borrow more each month to pay for food and in fact you are starting to actually repay what you owe.
The affect of debt management on your credit rating
One of the largest perceived problems of using a debt management solution is the fact that if you pay less than the minimum payments to your debts each month, this is going to make your credit rating bad.
A poor credit rating means that you will be prevented from borrowing more in the future. This is a major worry for many people and one of the reasons that a lot of people are put off debt management solutions.
But before you dismiss debt management solutions on this basis, stop to think. If you continue to borrow what you cannot afford, eventually you will reach your credit limit. You will not be able to borrow more and you will not have enough money to pay for everything you need to spend money on each month. Something will then have to give.
You have to buy food and therefore you will be forced to start missing credit payments. Once this happens, default notices will be issued against you and your credit rating will be affected as badly as starting any debt management solution.
For this reason it is far better to get your debt problem and financial situation under control early using debt management. The longer you try to manage, the further into debt you will get and the more painful it will ultimately be to implement a solution.
Starting a DMP or IVA early will put you back in control and in a position where you have enough each month to pay for your food and other essentials without borrowing more. You will also start repaying what you owe and put an end to borrowing each month simply to pay for the shopping bill.
Arrange a call with an IVA Expert