The Financial Conduct Authority has urged consumers to seek support with financial issues, as the burden of the cost of living increases.
Some 42 per cent of struggling borrowers are not seeking support because of embarrassment, according to research conducted by Yonder Consulting for the FCA, published this week (July 5).
Out of the 2,969 borrowers in financial difficulty surveyed between October last year and March this year, 40 per cent said they thought simply talking to a debt adviser would have a negative impact on their credit file.
But the FCA clarified speaking to a lender will not affect a credit file.
If an agreement is reached by the lender and borrower, that will appear on a file, though the regulator highlighted that not engaging with a lender and missing payment will also affect credit files.
Alongside the government-approved online advice service MoneyHelper, the FCA urged those impacted to get help as soon as possible.
Executive director of consumers and competition at the FCA, Sheldon Mills, said anyone can find themselves in financial difficulty, and the rising cost of living means more people will struggle to make ends meet.
“If you’re struggling financially the most important thing is to speak to someone,” he said.
“If you’re worried about keeping up with payments, talk to your lender as soon as possible, as they could offer affordable options to pay back what is owed.”
The research showed that borrowers in financial difficulty are more likely to be female, with 59 per cent of women struggling with debt compared with 40 per cent of men.
Mortgage expert at Quilter, Karen Noye, said getting help early on can stop you spiralling into a serious situation, and lenders have lots options available to those struggling.
“Although understandable, burying your head in the sand is potentially the worst course of action when it comes to problem debt.
“There is a huge connection between mental and financial health, and it is always best to seek help otherwise as one aspect of your health deteriorates so does the other.”
Asking for help
The research also showed the positive impact of reaching out for help.
Eight in 10 (79 per cent) of those struggling with debt said they would recommend using debt advice, and 70 per cent said the advice had been more helpful than they had anticipated.
Head of personal finance at AJ Bell, Laura Suter, said more signposting is needed to stop those seeking advice from being scammed.
“Lots of people don’t know where to turn for help, with many being too embarrassed to ask family or friends,” she said.
“Google was the answer for lots of people, leading them to various websites.
“However, there is a significant risk of scammers preying on those searching for help through Google, as we know many fraudsters have turned their attentions to the current cost of living crisis to find more victims.