7 tips for renters to get out of debt

Finances are being stretched as the cost of living crisis continues, and it's hitting renters particularly hard.

Debt charity StepChange found 15% of private renters (an estimated 1.1 million people) are now in problem debt compared to 8% of the general population. 

Here, Which? outlines what steps tenants can take to help manage and get out of debt.

1. Work out if your debt is a problem

Debt isn’t always a problem and most people will have some form of it, whether that’s a credit card, student loan, or an overdraft on their current account.

If you have debts that you pay off each month and don't exceed your yearly earnings, then you probably have managed debt. However, if your debts add up to more than you earn in a year or you’re struggling to repay them, you may well have problem debt.

StepChange defines severe problem debt as someone selecting three or more of these signs of financial difficulty:

• making just the minimum repayments on debts
• using overdraft in each of the last three months
• using credit, loans or an overdraft to make it through to payday
• falling behind on essential household bills (eg rent, mortgage, energy bills, council tax, etc)
• using credit to keep up with existing credit commitments
• getting hit by late payment or default charges
• missing a regular monthly payment on at least one debt
• and using credit to pay essential household bills (eg rent, mortgage, energy bills, council tax, etc)

If you think you have severe problem debt, it's best to seek free debt advice from places such as StepChange, Citizens Advice or National Debtline.

2. Get rent payments back on track 

If you're struggling to pay your rent or have already missed a payment, you should contact your landlord or letting agent as soon as possible to discuss your options.

While your landlord isn't obliged to offer support, they may be willing to discuss a compromise that will enable you to keep living in the property, such as reducing your monthly payments for a while. 

Prior to contacting them, consider putting together a budget that outlines your income and existing financial commitments to give you an idea of how much you might be able to pay, and will show your landlord you're serious about getting your payments on track.

Tenants in England or Wales may be able to qualify for a government scheme for people struggling with debt. It’s called the Debt Respite Scheme, also known as Breathing Space.

The initiative provides temporary respite from eviction for 60-day period, at which time you should still make rent payments if you can. 

A similar scheme called a 'moratorium' exists in Scotland, which offers protection from legal action over unpaid debts for a period of six weeks.

• Find out more:  what to do if you can’t afford your rent 

3. Challenge rent rises

According to StepChange half of all private renters (3.7 million people) have seen their rent increase in the past 12 months and renters are spending 37% of their income on rent, compared with 29% for social renters and 27% for those with mortgages. 

While it might be difficult to convince a landlord to cut your rent, you may be able to challenge or delay a rent rise. Use our guide to your rights when renting from a private landlord to find out how to do this.

Alternatively, consider whether moving to cheaper place would work for you. Use a property portal such as Rightmove or Zoopla to find cheaper areas close to where you currently live. It’s important to ensure you balance the cheaper rent with other costs, such as a potentially longer commute. 

4. Reduce your priority household bills

Other essential bills, such as council tax and energy, might be worth reviewing.

You might be able to save on council tax, for example, if you live alone or have people living with you that are not counted as a second resident, such as an 18 or 19-year-old in full-time education. 

You can find out more in our guide on how to get a council tax reduction or discount.

It can be hard to find a good deal on energy at the moment. But there are ways to cut your energy bills.

Stopping heat from escaping through gaps around doors and windows could save you around £60 a year, according to Energy Saving Trust. Also doing laundry at 30ºC (rather than 40ºC) cuts the cost by 38%, according to our tests.

• Find out more: 17 ways to save money on your household bills

5. Tackle expensive debts first

StepChange's report found more than 1.2 million private renters (17%) are using credit to make ends meet.

If you’re struggling with making repayments on any kind of borrowing, whether that’s a credit card or loan the best thing to do is to contact your lender to explain the situation. Lenders may be able to adjust your repayment plan or give you a repayment holiday.

Once you have a bit more stability focus on clearing debts that are costing you the most in interest. For example, if you have a a credit card charging 18.9% APR it's worth trying to pay this down.

A 0% balance transfer credit card can help. These cards allow you to freeze the interest for a set period, meaning all your repayments will go toward the debt, rather than the debt and interest.

• Find out more: how to pay off your debts

6. Explore ways to make extra money 

Once you've come up with some ways to reduce your outgoings you can focus on making a bit of extra money. 

Selling the things you never use could be an option. You can sell your preloved stuff on eBay, Depop or Vinted. Just watch out for fees, which can eat into any profits you make. 

Or there's mystery shopping, which lets you get paid for things you already enjoy doing. Mystery shoppers are regularly used to test supermarkets, retailers, restaurants and hotels. You can register with websites such as Mystery Shoppers and Market Force to see what assignments they are running.

• Find out more: 47 ways to make money

7. Check what benefits you can get

You might be eligible for benefits and tax credits that could boost your income. Check the Turn2Us benefits calculator to see if there are any you are missing out on.

For example, you may be able to apply for working tax credit or child tax credit. Working tax credit is for working people on low incomes, and the money is there to help with day-to-day expenses. Child tax credit is for those on a low income who are responsible for at least one child or young person. 

• Find out more: tax credits and benefits explained

How renters could be better protected 

The government unveiled the new Renters' Reform Bill last month, which has a series of measures to improve tenant rights. 

The long-awaited shake up to the private rented sector in England aims to help 11 million tenants benefit from 'safer, fairer and higher quality homes', and includes a ban on no-fault evictions and improving the rights of tenants to have pets. 

• Find out more: Renters' Reform Bill explained

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