Credit cards, overdrafts and loans
Credit cards and overdrafts are not always the best way to borrow money, as the interest can be high. If you’re struggling to pay back money lent to you, then you need to work out a plan and deal with it so you aren’t accumulating more interest and increasing your debt.
What to do
Money you owe from your borrowing is a non-priority debt because the consequences for non-payment are less severe than for other bills (unless it’s a secured loan, then you could lose your house). But you can’t forget about your non-priority debts and if you fail to pay you could eventually be taken to court.
You should work out a payment plan and contact your lender, bank or credit card provider and let them know your reasons for not being able to pay your debt and how you plan to deal with it.
If you are paying interest on your credit card debt, then you should consider transferring your balance to a new card that has an introductory interest free period on balance transfers.
What they will do
The Banking Code says that your lender should look at your position sympathetically and positively. So they may discuss your options with you to tackle your debt situation and come to an agreement. They may temporarily stop charging you interest so you don’t get further into debt.
If you go over your overdraft limit, your bank may charge a penalty fee and a higher rate of interest on the excess. The bank may also freeze your account, and you won’t be able to access it even if your salary is paid into it.
Worst case scenario
Your bank can make a County Court Judgment (CCJ) against you. If you have to go to court to resolve the matter it will affect your credit rating and you may have problems with credit in the future, which can affect your ability to borrow.
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