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Kevin Allen, managing director of Close Finance CI, says communication is key in cases of financial difficulty
We all recognise how fortunate we are to live in such beautiful and picturesque islands.
But, with inflation in Jersey and Guernsey stubbornly remaining ahead of the UK, living in the Channel Islands comes with its own unique set of financial challenges.
From the rises in housing costs to increases in living expenses, managing finances can sometimes feel like navigating extremely choppy waters. If you find yourself in a situation where you can’t afford your loan repayments, it’s crucial to take proactive steps to address the issue.
Assess your financial situation
The first step in addressing any loan repayment struggles is to take a comprehensive look at your finances.
Create a budget detailing your income, expenses and debt obligations. Understanding where your money is coming from and where it’s going will provide valuable insights into how best to proceed.
It will also help you see if there are any areas that you can cut back on, even just temporarily. This could involve cancelling subscription services or finding cheaper alternatives for everyday purchases.
Contact your lender
Communication is key when facing financial difficulties. If it’s unlikely that you’ll be able to meet your loan repayments, don’t ignore the issue or wait until you miss a payment to reach out to your lender. Talk to them as soon as possible to discuss your situation.
They may be able to offer alternative repayment arrangements or relief options during periods of financial hardship, such as a temporary reduction in monthly payments, a brief payment holiday, or a restructuring of your loan. The options available will vary depending upon your individual circumstances and the period over which you are likely to need help. It should also be considered that if your finance provider or lender agrees an alternative arrangement with you, this will be reflected on your credit file for the duration of that arrangement.
Seek advice
Seeking advice from a financial adviser or lender can provide invaluable support during challenging times. An adviser can help you create a budget, prioritise expenses and explore potential debt management strategies. They may also be able to offer emotional support and encouragement as you navigate your financial journey, as well as signpost you to appropriate support channels. Free advice is also available through the Citizens Advice Bureaus in Jersey and Guernsey.
Consider debt consolidation
If you have multiple debts with high interest rates, undertaking a refinancing exercise and consolidating all your debts into a single loan at a potentially lower interest rate may help to reduce your monthly payments. This could help you manage your debt more effectively and potentially save you money in the long run. This may not be suitable for everyone as it depends on individual circumstances, so it’s worth considering all the pros and cons and seeking professional advice before making a final decision.
Take steps to avoid future financial struggles
Once you’ve addressed your current loan repayment issues, take proactive steps to avoid falling into the same situation in the future. If possible, build an emergency fund, create a realistic budget to follow and avoid taking on additional debt unless absolutely necessary.
Facing difficulties with loan repayments can be overwhelming, but it’s important to remember that there are options available to help you regain control of your finances. By assessing your situation, seeking assistance and taking proactive steps, you can work towards a brighter financial future. Remember, you’re not alone and there are resources and support available to guide you through such challenging times.
