Disclaimer: Our website and publications aim to give you general information to help you make financial decisions. It is not advice, nor can it take account of your own particular circumstances. For advice with a view to making decisions about your own circumstances you should consult a financial or other professional adviser.

© The Financial Services Authority.

More about coping with change

Even if you are managing your borrowing at the moment, bear in mind that this can change if your circumstances alter.

Circumstances can change for numerous reasons, for example because of:

  • relationship breakdown;
  • long-term sickness or disability;
  • starting a family;
  • a family bereavement;
  • unemployment or sudden redundancy.

And events outside your control, such as a rise in interest rates or an increase in the cost of living can also affect your ability to manage your debts.

However, there are lots of things you can do to avoid problems, and lots of places where you can get help and advice if needed (see below).

How to improve your position

It makes sense to do what you can to prevent borrowing problems occurring in the future. Don’t borrow more than you can afford to repay and work out a realistic budget.

Emergency fund: consider setting up an emergency fund, if you haven’t got one already. Work out how much you can afford to put aside each month and try to build up enough savings to cover your spending for about three months.

Remember, this is an emergency fund! Don’t be tempted to dip into it for other reasons.

Insurance: you might want to consider taking out insurance to protect yourself and any dependants against changes in your income. Your partner, if you have one, might want to think about this type of cover too.

However, the various kinds of insurance available are not suitable for everyone or all circumstances and they can be expensive. Consider getting advice from an insurance broker or financial adviser.

The FSA's Healthcheck is a quick and easy to use tool for anyone who wants to plan their finances but isn't sure how to take the first step.

See also, More about: Making the most of your money

Can I borrow more? How much is too much?

Just because someone will lend you money, that doesn’t necessarily mean you can afford to borrow it!

Make sure you can manage the repayments and think about what would happen if your circumstances changed. Do this by drawing up a budget taking into account how your income and spending are likely to change over the lifetime of the loan. Also look at how much you will pay back in total (by multiplying the monthly payment by the number of payments). You might be surprised!

To help you to budget, use a budget calculator - for example, see the FSA budget calculator or take a look at www.nationaldebtline.co.uk.

Credit repair

If you’ve had problems with debt but you’re now getting yourself sorted out, you might think about trying to repair your credit history. Don’t be tempted to pay for a credit repair service which claims it can clean up your credit history.

You can sort out your credit report either yourself or with expert help free of charge. You can get free advice about:

  • County Court Judgments, bankruptcy, defaulted accounts and other arrears
  • sorting out your debts
  • applying for credit even if your past is not perfect
  • the contents of your credit report.

For free help and information on repairing your credit history, go to www.ukcreditrepair.co.uk

Contact numbers and internet links