What is considered financial difficulty?
Understanding financial difficulty is so important when facing tough times, especially when dealing with institutions like banks or mortgage lenders. According to the UK’s Financial Ombudsman, financial difficulty is a situation where an individual or household is struggling to manage their financial commitments due to changes in their circumstances or an increase in their living costs.
When you find yourself unable to keep up with bills and repayments, such as your mortgage, credit cards, or utility bills, you might be experiencing financial difficulty. This can stem from various life events like losing a job, suffering from a serious illness, experiencing a significant drop in income, or unexpected expenses. The Ombudsman recognises that these scenarios can place a significant strain on your finances, making it hard to maintain regular payments.
It’s also important to understand that financial difficulty is not just about being in debt, it includes situations where your income does not cover your essential outgoings, leaving you unable to afford necessary items or services. This can create a cycle where the inability to meet one payment leads to penalties and higher costs, further adding to your financial woes.
The Financial Ombudsman advises that if you’re in this situation, the first step should be to contact your creditors, including your bank or mortgage lender, as soon as possible. Many lenders have policies in place to help those in financial difficulty and may offer solutions such as payment holidays, reduced payments, or restructuring your debt to make it more manageable. It’s crucial to communicate openly about your situation because ignoring it can lead to more severe consequences like increased debt or legal actions.
Additionally, the Ombudsman emphasises the importance of seeking advice from financial advisors or debt counselling services. These professionals can help you create a budget, prioritise your debts, and explore options like debt consolidation or negotiating with creditors. They can also provide emotional support, helping to alleviate the stress and anxiety that often accompany financial difficulties.
Financial difficulty can make you feel overwhelmed and isolated, but it’s important to remember that help is available. The key is to act early, seek advice and stay informed about your rights and the support systems in place. By taking proactive steps, you can begin to regain control over your financial situation and work towards a more stable future
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