Has the pandemic left you struggling with debt?
As 2.8 million people face unemployment in the UK and household debts climb to £6bn, Closer investigates the impact coronavirus has had on our finances – and how to improve them
❛ THINGS ARE REALLY BLEAK – WE OWE £2,500 AND I CAN’T SEE A WAY OUT ❜
Every time her phone rings, Beth McBride worries it’ll be yet another company demanding money and reminding her she is late with her payments.
Already this month, Beth is behind on her credit card, council tax, water and gas bills – and she has no idea how she will ever be able to catch up with her spiralling debt.
Beth, 30, who lives in the Wirral with her partner, Mike, 28, and her seven-year-old son, Jack, says, “I feel desperate. We’ve always lived hand to mouth with no savings, and we managed okay. But when the pandemic hit, I had to stop work as a cleaner, so my weekly income dropped immediately from around £200 to nothing. Our debts have already increased by £1,000 since March and I can only see them rising. I constantly feel sick with worry.”
SELF-EMPLOYED
Beth was eligible for a selfemployment grant, but because of the way it’s calculated she only qualified for £476, which is supposed to last three months.
She says, “My husband is selfemployed too as a web designer, though luckily his income hasn’t been affected. But he doesn’t earn a huge amount and so we’ve had to raid the money he’s put aside for his tax bill just to pay the rent, electricity and the weekly shop. I have no idea how we’ll make it all back up.”
FALLING BEHIND
Debt advice charity StepChange predicts that, worryingly, many people will be in the same situation as Beth. British households are expected to rack up debts worth a combined £6bn because of the coronavirus crisis, as millions of people fall behind on credit card payments, council tax and utility bills. A shocking
4.6 million households risk building up dangerous levels of debt because of the pandemic.
StepChange adds that debt charities are gearing up for even more demand for their services, as lockdown measures triggered rising job losses and reduced working hours and pay – with fears of further major job losses as the government’s furlough scheme is withdrawn.
According to a study carried out by the organisation, each affected adult will accumulate an additional £2,073 of debt on average because of the crisis. Since the beginning of lockdown in late March, as many as 1.2 million people have fallen behind on utility bill payments, 820,000 people on council tax, and 590,000 on rent. Around 4.2 million people borrowed to make ends meet, mostly by using a credit card, overdraft or a high-cost product such as a payday loan.
Phil Andrew, chief executive of StepChange, says, “We were already dealing with a debt crisis, but COVID-19 has so far added another four million people – and counting – to the number who are going to need help finding their way back to financial good health. This is a problem that isn’t going to solve itself.”
Sadly, Beth has no idea how she’s ever going to escape from her mounting debts. She says, “I can’t sleep as I’m worrying so much. I’ve contacted my credit card company and frozen my account, and I’ve written to everyone else about payment breaks and am waiting to hear back. In total, we’re around £2,500 in debt which is a huge amount for us. I can’t see a way out of it. The interest is building up and I’m still not able to work as clients don’t want me back.
They’re still concerned that it’s not safe – and I’m worried they will never need me again as everyone’s feeling the pinch at the moment and I could be the victim of cost cutting. I want to take an online course to get some new skills but it’s hard to do at the moment as I’m juggling childcare too. Things are really bleak.”
REDUNDANCIES
Financial expert Jasmine Birtles, who works for the website MoneyMagpie, is sympathetic towards Beth and others in her position, but she says things can be done to improve financial situations at this difficult time.
She says, “This pandemic will have a huge effect on many people, and for months to come. Redundancies are already happening at an alarming rate and they will no doubt
continue. But the government is trying to help, and do check with your provider – you may be able to have an extension on loan repayments and mortgage holidays.
“If you lose your job, consult turn2us.org, an excellent website that will help you find out exactly what benefits you’re entitled to. And if you are furloughed, then perhaps use this time to learn a new skill – there are lots of free online courses on mooc.org. Tech courses will be particularly useful or do something practical like a plumbing course. At the very least, it could save you callout fees on more basic repairs if something goes wrong at home!
“Don’t bury your head in the sand. That’s the worst thing you can do. There are options and people who can help.”