Recognising the warning signs of debt

Debt is a very personal issue that means different things, depending on your situation. Everyone is likely to experience debt of some kind, whether that’s an overdraft, a mortgage or a student loan. According to a poll by, 63% of UK adults had personal debt of some kind at the beginning of 2020.

Debt isn’t necessarily a bad thing if you’re able to manage it, but there are times when it can become a problem if you find yourself struggling to make repayments.

Remember that debt is nothing to be ashamed about. Unexpected events like job losses, illness or bereavement can suddenly create financial difficulties we might never have planned for. Even if you have found yourself in debt because you’re struggling to manage your money, there are ways to overcome your financial difficulties.

By identifying the warning signs early on, it’s easier to get on top of debt before it becomes a problem. Taking action is important, which is why The Co-operative Bank is always on hand to help and support you, whatever your situation.

Warning sign #1: Running out of cash

If you're struggling to repay your overdraft, struggling to make more than the minimum payment on your credit card or borrowing money to pay off existing debts, it's a clear sign that you're running low on cash and may have a problem. You might also be reliant on payday loans or short-term cash advances. These loans can have very high interest rates that could potentially make your situation worse over the long-term. Missing payments or paying your bills late, or simply being unable to put money aside for your savings, are also signs that you might be struggling with your finances.

What can help?: Understand where your money is going

If you're searching for new lines of credit, always read all the information carefully and check how much interest you'll have to pay, how long you'll be repaying, what the total cost of borrowing will be and other important information such as what you’ll be charged if you miss or make a late payment.

For further tips, we've also put together this helpful guide on how to budget effectively.

Warning sign #2: Only making minimum repayments

If you only make the minimum payment required each month on your credit card, it will take you longer and may cost you more to clear your balance. If you're able to pay more, you may pay less interest and will repay what you owe more quickly. If you're consistently only paying back the minimum amount, it can also be a warning sign of financial difficulty.

For example, MoneyHelper calculates that if you had a £5,000 balance on a credit card, with an interest rate of 19.9% and a minimum repayment for month one of £132.92 that reduced each month thereafter, it would take 18 years and 10 months to pay off the debt – having paid back £12,277.84 in total. But if repayments were fixed at £200 every month, the balance would be paid off in just 2 years and 9 months, having paid back £6,511.27 in total.

What can help?: Check your repayment options

Go back and check the interest rates and repayment options on your credit cards, overdrafts and personal loans. 

You could also use a consolidation product like a balance transfer credit card to help manage your finances. If you're eligible, you may be able to move credit card debt, if you have it, to a single card but make sure you check the interest rate and any fees involved in transferring the debt so you understand the total costs.

Whilst a balance transfer might be the right option for you, it's really important that you weigh up all benefits, costs and risks of the product you're interested in, so that you can make sure it fully meets your needs.

If you're a customer of The Co-operative Bank and need free debt support or help managing your money, you can also contact our support team.

Warning sign #3: Repeatedly turned down for credit

If you find that you're consistently being denied applications for new credit lines, such as overdrafts, credit cards, mortgages or even mobile phone contracts, it could be a sign that you have a debt problem and it is negatively impacting your credit score. Creditors may have looked at your credit history and may decide to refuse your application based on the information they have seen about how and when you pay your bills.

What can help?: Improve your credit score

The first step is to check your credit report by requesting it for free through a Credit Reference Agency (CRA). This will allow you to check all details are correct and understand your current situation, including your credit score. Improving your credit score isn't as complicated as you might think. Simple changes like registering on the electoral roll or reducing the number of credit applications you make could improve your score.

If you do find that there's incorrect information on your credit file, you can contact the company that provided the information to the CRA and ask them to remove it. If you were declined a product because of the incorrect information, you may be able to ask for the decision to be reviewed.

Always check eligibility and credit history criteria before applying for a product as it may be clear from this your application is likely to be declined. Some credit providers also provide online eligibility tools for products such as credit cards and overdrafts so you can check your eligibility before applying. This can prevent a declined application from impacting your credit score.

Building up your credit score over time could help you to take control of your finances. For example, a better score could enable you to access lower interest rates or consolidate your debt through a balance transfer. If you'd like to find out more about improving your credit score, you can check out our credit score guide.

Warning sign #4: Increased anxiety and stress

If you're experiencing mental health issues due to your finances, such as increased anxiety, it can make it even more difficult to manage your debts and take action. These issues can impact on the personal relationships in your life too, such as if you feel the need to hide the reality of your financial situation from family and friends.

What can help?: Seek advice and support

Seeking support with a financial problem is never easy, but it's an important and courageous first step in the right direction.

If you're a customer of The Co-operative Bank, you can contact our support team to receive tailored one-to-one support.

One of our partners StepChange has also put together a six-step guide for those feeling weighed down by money worries.

If you're concerned about your mental health, talking to someone is also an important first step. Talking therapies are an effective and confidential treatment for common mental health problems and are available through the NHS. Your GP can refer you to different types of talking therapies or you can refer yourself online.

The Every Mind Matters website also offers expert advice to help improve your wellbeing, as well as practical tips on sleep, coping with money worries and self-care. Other resources include our podcast on mindfulness which you can find on Apple Podcasts or Spotify, with tips on how to relax and look after yourself.

Don't ignore the warning signs - and don't worry

Remember: the sooner you can recognise the warning signs of debt, the sooner you can begin to get help and take action. Don't ignore the signs – but don’t worry if you recognise them either. There are lots of support options available, and contacting our customer support team will never make the situation worse; it will just help you to understand your options.

As an ethical bank, we also work with a number of charities and organisations that can provide further support to those experiencing financial difficulties and other challenges. You can read more about our financial support partners and other helpful services on our Money Management Hub.

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