The value of communicating with the bank

People with serious debt levels may find they are soon slipping into despair about how they can possibly manage to pay them back.

But burying your head in the sand is no way to respond, according to Michelle Highman, chief executive officer at debt charity Credit Action.

She noted that speaking to the bank at an early stage is important as a means of tackling debt.

And one group she said is particularly vulnerable to the problem is students, as they tend to leave higher education with a lot of debt and then find their student account is change to a graduate account – with less favourable terms.

"To help you pay back any credit debts, ensure you start making payments towards your debt as soon as possible," she said, noting that while an interest free overdraft may remain in a graduate account, those who have been using an overdraft while studying should speak to their bank about how this will operate subsequently.

After this, graduates may benefit from using a budget planner, with Ms Highman explaining: "You can then speak to your bank about coming to an arrangement to pay back what you can afford each month."

Graduate debt is one of those areas of greatest concern when it comes to the amount some people owe.

While there are consumers who are in debt due to excessive spending or unfortunate changes in circumstance like redundancy, graduates are hit by a combination of loans and course fees to start with, followed by the difficulty in finding a well-paid graduate job afterwards.

But all consumers may benefit from contacting banks early on if paying debt is a problem.

The alternative is often to take on more debt and make the problem worse, with recent research by MoneySupermarket.com finding 25 per cent of consumers use credit cards to make up shortfalls in cash.

By Joe White