It is important that you manage your budget and bills and avoid missing payments or getting into debt as it can seriously affect your credit rating.
It is important that you manage your budget and bills and avoid missing payments or getting into debt as it can seriously affect your credit rating.
If you are considering future loans or possibly buying your property at some point, or even getting a phone/internet contract and you have arrears this can affect your future chances of getting credit.
Sometimes people have to make hard choices about what gets paid but knowing the consequences for not paying will hopefully make those decisions easier.
The most important payments to make are known as Priority Payments.
Order of payments:
1. Rent
Anybody could be short of money and when this happens it does mean difficult choices, but paying the rent is the first priority.
If you are evicted from a council property for not paying your rent, you are considered intentionally homeless. This means the council has no obligation to help you find new accommodation and you will be expected to find a private landlord. The council will not rehouse you and it is very difficult to find a landlord once evicted from social housing.
If you are struggling to pay your rent please let your landlord know as soon as possible.
2. Council tax
Council tax recovery is aggressive and quick, if you miss a payment, you will get the chance to make an agreement, if you miss that then you will be taken to court and be liable for court costs on top of the council tax. Money can be taken from wages and benefits and if bailiffs are employed, they will also charge you. Ultimately you can be sent to prison for non-payment.
Important: The council understands that sometimes financial circumstances can change. If you can’t pay your rent or council tax, contact our tax team, they will try and find a way to help and offer support.
The Council work with lots of people who have to contact them for help. As long as you are in regular contact and making agreed payments, they will work with you. Problems happen if the debt is ignored, and no contact is made.
3. Child maintenance
Enforcement of this can be severe, such as prison, losing your passport or driving licence.
4. Court fines
Money will be recovered from your income and ultimately bailiffs and prison will be enforced, don’t forget extra charges can be made to fines for recovery.
5. County Court Judgements (CCJs)
The person you owe money can take you to court and order you to make payments.
Courts can also authorise taking money from wages. You can be made responsible for extra costs for recovery action.
Any CCJ awarded against you goes against your credit rating.
6. TV licence
There are fines and costs for recovery and you could ultimately go to prison if you do not pay for your TV licence.
7. Gas and electric
Despite misconceptions and common belief the gas and electric can be disconnected even if there are children in the home.
Money can also be deducted from benefits.
Suppliers can also remove the meters, so the supply is no longer possible at the property. Once removed it is very difficult to have them refitted and it can cost hundreds of pounds.
8. Water
Water companies cannot cut you off, but they can reduce water supply/pressure, plus they can make deductions from benefits, or they can issue a County Court Judgement (CCJ).
9. Hire purchase and logbook loans
Hire purchase is a loan against an actual item and belongs to the company until paid in full so it can be repossessed if payments are not received.
Priority depends on the item. If it’s for a PlayStation it is not likely
to be considered a priority payment but if it is a car for work, a fridge or cooker, it is reasonable to expect that this as a priority payment after all the above priority payments.
10. Telephone
You can be cut off and have a County Court Judgement (CCJ) for non-payment.
Credit arrears
Arrears can show on credit history and can affect future borrowing contracts. People can also be charged for late payments, and liable for all court costs and bailiff charges.
Always look at terms and conditions prior to borrowing and the interest rates.
Example:
Borrowing £1000 over two years
Good credit: Loan at 7% APR = £44.68 per month - Total repaid £1072.20
Bad credit: Loan at 50% APR - £61.86 per month - Total repaid £1484.61
Some companies charge APR over 535% APR, for example pay day lenders.
Always check you can afford to pay back before you take out the loan.
To find out how much you will need to pay back always use a loan calculator which will work out the amounts for you.