Scots are embarrassed to talk about debt

Mamta Shanbhag | Supplied

Debt consolidation can be a useful tool to help manage debts, yet a considerable number of people don’t know it exists as an option, or how it works. Research from Tesco Bank found that nearly a third of Scots don’t understand what debt consolidation is.

While there is a lack of know-how, there is an appetite from some to find out more about it. Some 10 per cent of people in Scotland reveal they only have some understanding of debt consolidation but would like to learn more.

Debt consolidation can be an option for those who have several outstanding debts to roll them into a single monthly payment, making it a helpful way for some to manage and reduce debt over time.

While there are a considerable number of people who have little understanding of debt consolidation, 13 per cent of Scots have used debt consolidation in the past.

However, the research also highlighted what people think are the barriers when it comes to accessing debt consolidation.

Some 17 per cent of people in Scotland cited high interest rates as the main issue, whereas 11 per cent said a lack of understanding or awareness of debt consolidation prevents people from accessing it.

Mamta Shanbhag, Help Me Borrow director at Tesco Bank, said: “While the thought of taking out another loan may feel daunting, consolidation loans offer a really simple way for some to help manage their money better. By streamlining any debts into one place with a single repayment plan it can become easier to know how much you need to pay back each month and how long it will take to clear your debt.”

Mamta Shanbhag shares her tips on managing debt:

Keep an eye on debt levels

It’s important to keep an eye on debt levels so they won’t catch you out. If you have multiple loans, try and keep all the paperwork together in one place – perhaps in an App, on your computer or in a physical folder - that you can refer to regularly and keep on top of how much you need to pay back and by when. That way you can see clearly which debts need to be paid first and if there are any fees attached.

Do your research

It’s important to assess what the right borrowing option and product is for you. A credit card may be more suitable to help spread the cost of a big purchase or to cover an unexpected expense, whereas a loan may help for larger purchases such as a new family car or home improvements. Always check the small print so that you’re clear how much interest you’ll pay. Interest free periods can be helpful but it’s important to know how long it lasts for and what rate you’ll pay when it ends. Before taking out a loan, make sure to note down the total amount you’ll repay as well as the Annual Percentage Rate (APR), and whether it’s a secured or unsecured loan. Make sure you don’t end up in a situation where you find you need to pay a loan back within a time frame you didn’t expect or move to a higher interest rate than you anticipated. As with all financial products, it’s important to seek financial advice if you’re unsure whether a product is right for you.

Set up a budgeting app

Planning your budget can help you track where your money is going. Using a budgeting app can help give you a full picture of your weekly or monthly spending and can help identify areas where you might be able to make changes. You can use virtual tools such as spreadsheets or online budgeting planners to support you too.

Speak to someone

For many, talking about money is a taboo subject and can be difficult to bring up in conversation. However, not communicating about it could also lead to struggles in some shape or form later down the line. Whether it’s talking about financial goals with a partner, or money mistakes and difficulties with loved ones, being honest and open about your financial situation could take some weight off your shoulders and allow you to feel more in control. Preparing in advance what you want to say and structuring your thoughts can be an effective way to ease into conversation.

Speak to the experts and consider your options

Citizen’s Advice or Step Change both offer free, impartial help on debt and other financial advice. Do some research, seek some support, and find the solution that suits your personal circumstances the best.