We live in a frequently changing world where an average UK income doesn’t support rising energy prices, increasing debts, unstable housing markets, and an impending recession – these are only a few things we need to consider about our futures.
The price of living has been dramatically increasing across the UK since early 2021 and inflation has reached its highest-ever level.
Millions of people throughout the UK are struggling to cover their crucial household bills nowadays. The consequence of the cost of living crisis is that we are all paying a lot extra for energy, food, and essentials like rent and fuel. This means that people will have less disposable income to pay off their debts.
What is a cost-of-living crisis?
A cost-of-living crisis is a scenario in which the cost of living increases much faster than people’s income, leading to a decrease in people’s standard of life. It can be brought about by a general rising expense of living, necessary goods and services increasing in prices, and a reduction in salaries. Cost-of-living crises can have a disastrous influence on households and people, leading to financial difficulty and hardship. In some cases, people are compelled to cut back on fundamentals like food and medical and dental care to make ends meet. This can have a serious impact on health as well as wellness.
Some people are reducing the amount they spend on food, or consuming much less, so they can pay for heating their homes. It has been reported that some parents are skipping meals to feed their children. Many people are drowning in debt already and are turning to payday loans or using credit cards to pay for household essentials, making the problem even worse.
Sadly, the circumstance is unlikely to get much easier anytime soon. Household energy bills have risen by an average of ₤700 a year also council tax payments are on the increase too. If you have a job, the amount you pay in National Insurance payments has also increased.
Debt often has a significant effect on a person’s mental health. Virtually fifty per cent of people with outstanding debt also have a mental health issue, and forty per cent say their financial difficulties have made their mental illness worse, according to the Money and Mental Health Policy Institute. Individuals are 4.2 times as likely to experience clinical depression after 18 months if struggling to manage their debts.
Ideas to help with the cost-of-living crisis in 2023
1. Create a personal financial budget plan to prioritise which costs are the most important.
2. See if you can raise the amount of money you have coming in. If you are in employment, perhaps a second part-time job or try and move to a higher-paid position.
3. Look at ways to minimise your outgoings. At times like these, it is a good idea to be frugal and cut back where possible.
4. Make sure you know if you are entitled to any benefits or not, and claim them if you are.
5. Shop around, and always use discounts, offers and cashback where possible.
6. When it comes to existing debts, see if you can get any balance transfer offers or consolidate your debts into a loan with a lower interest rate.
Should I get a debt consolidation loan?
If you’re considering consolidating your debt, it is very important to comprehend exactly how the procedure works and what the possible disadvantages are, as well as the advantages.
Advantages of debt consolidation:
Lower interest rate: When you settle debt, you might be able to qualify for a lower interest rate on your brand-new loan. This can conserve your money on interest costs gradually as well as assist you to get out of debt much faster.
One monthly repayment: combining your debt into a solitary loan can simplify your funds by offering you one regular monthly repayment to make. This can be helpful if you’re battling to keep track of multiple debts with various due days.
Access to extra funds: If you settle your debt with a home equity loan, you may have access to extra funds that you can utilise for various other purposes, like house improvements or maintenance.
Cons of debt consolidation:
There are a couple of potential drawbacks to debt consolidation that consumers need to know prior to making an application for a consolidation loan. First, consolidation usually lengthens the payment timeline, which indicates you’ll be in debt for longer. This can be an issue if you have a background of making late repayments or missing repayments, as it offers you more time to do so.
If you expand your payment timeline or don’t make prompt payments, the interest rates can still increase and you may still incur charges. This is because loan providers might view you as a higher-risk debtor.
Finally, sometimes debt consolidation loans require a guarantor or collateral, such as your home or another asset, which you can lose if you default on the loan.
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