The first step is to stop using credit - do not run up any more debt on your credit cards or bank account. The next step is to change to a basic bank account, which will not allow you to go overdrawn and is a safe place for the money that you will have coming in. Once you have done this, you should go to your creditors and negotiate payments with them so you can make inroads into paying off your debt.
Firstly, work out a budget - there is a good calculator to help you at Moneybasics. After this, you will be able to see what is left to pay your creditors. Get in touch with them, and make them an offer of payment. Ask if they will accept reduced payments, and ask if they will stop interest payments and charges until you are in a better financial situation.
Keep sending your creditors what you can afford - show them that you are willing to pay, even if you are unable to meet the payment that they are asking for. Don't be put off from doing this. CCCS can guide you through all this if you find it difficult and can be reached online or on 0800 138 1111.
In the future, you should look to avoid credit as much as possible until you have sorted out your current debts. Be wise about any sources of credit you do use. Make sure that you stick to any budget that you have worked out for yourself, so that you do not compound your problems.
I ended my first year nearly £5,000 overdrawn, partly because my bank kept charging me what seemed like huge charges for writing me letters telling me I was overdrawn. I want to change banks and get a student bank account (which I stupidly didn't last year out of misplaced loyalty to the bank I'd first opened an account with before university). But I'm confused about how to find the best deal. Also, will any bank accept me with the overdraft I've got? Sean McKellan, Preston
You should talk to your bank and see if you can get some of the overdraft charges refunded or reduced. The bank is under no obligation to do this, but it is likely that charges have amounted automatically. If you contact your bank and explain the situation, they may be in a position to help you. Most banks do have student accounts - ask the bank that you are currently with if you can convert your account to a student account with them - you may be able to negotiate cheaper rates for your overdraft. If you want to change banks, most require proof that you are a student to open a student account in the form of a letter from the university.
The National Union of Students has a leaflet which compares bank accounts and the offers and benefits that are associated with them.. Credit Action, a financial education charity, has a useful booklet about student finance including information on what to look for from a bank account.
My parents earn too much for me to get a student grant but they refuse to give me any financial help at university so all I have is the non-means tested student loan. I've managed to save some money by working but I don't want to work too much during my course when I should be studying or partying! Have you got any ideas about where I could go to get some extra funding? Amanda Winstanley, Surrey
Many companies offer sponsorship to prospective students. These are good opportunities to take up as in addition to providing you with extra income during your course, you will work for the company sponsoring you during the summer. In this way, you can keep your termtimes for studying and enjoying yourself, and use your holidays for gaining valuable work experience and earning some more money. The National Union of Students has a good sponsorship finder - go to the site's Money section.
What should you look for when taking out a credit card? I keep looking at all the comparison tables but I don't understand what things like APR mean. How do you tell which one will be cheapest? Is it a good idea to take out a card with 0 per cent APR and switch your balance to another card when the O per cent APR period ends? Are there any good websites I can look at? Louisa Kelly, Birmingham
APR stands for annual percentage rate and is the amount of interest you would pay if you left a balance on a credit card for a year. Interest is charged montly on credit cards, and for most cards you will end up paying between one and two percent per month of your balance as interest if you were only to make the minimum payment on your card.
As a student, it is unlikely that you would be granted a 0 percent credit card as you are not earning and have little or no credit record. You are therefore considered more likely to default on your payments. However, most high street banks will offer students a credit card, but this will be at an APR somewhere around 17 percent. As a general rule, we would not advise building up a balance on credit cards, rather paying them off at the end of each month to avoid interest charges.
Make sure you pay at least the minimum on your card on time or you could be hit with late-payment charges which could be as high as £30 a time.
I got a place at university through clearing and my student loan hasn't come through yet. I keep chasing the Student Loans Company but unsuccessfully so far and I'm sure I'm going to have to start at university and have loads of expenses without having enough money to pay for them. What do you suggest? Simon Cantrell, Stoke-on-Trent
Usually your first student loan payment is issued on the first day of university. The Student Loan Company has more information about this. If your loan does not come through in time for the first days at university, visit your university or college's welfare office, who will be able to direct you to hardship loans, which will tide you over until your loan comes through. If your loan is late coming through, see if you can arrange instalments on your housing costs until you have your money from the student loan company, rather than going into debt to pay the entire termly or monthly fee.
I've got a laptop computer, DVD and CD player and I'll be living in a shared house with friends next year. Should I take out insurance and if so where can I get a cheap deal?. I don't want to have to spend money on dull things like insurance so the cheaper the better! Andy Smith, Bournemouth
It's a very good idea to take out insurance on valuables like laptops and DVD players. The best option is to see if you can be included in your parents' policy. If this is not the case, insurers such as Endsleigh Insurance and Saxon Insurance specialise in insuring student possessions. Make sure that you have adequate insurance, as it is a common mistake to underestimate the value of your possessions.
