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Can I use a credit line to pay my energy bills?

Priority bills are inescapable, whether it’s rent, electricity or even your mobile phone. Unfortunately, like most things in life, necessities are rarely free and, while usually manageable, the forecast rise in living costs is making money management an even more stressful affair.

During the pandemic, borrowing was made incredibly cheap by the Bank of England reducing the base rate to an all-time low. The base rate sets the precedent for banks’ interest rates, and a low base rate means borrowing becomes cheaper. Among other factors, this is intended to encourage consumers to spend money – rather than save it – in order to give the economy a bit of a boost (in a time when people were facing job loss and uncertain income). While borrowing was made cheaper to benefit the economy on the whole, it isn’t always the best solution for your personal finances, especially if regular expenses like your energy bills are already becoming a bit of a struggle.

What are the consequences of not paying my energy bills?

Energy bills can include your water, gas, and electric usage throughout the month. There are various ways to pay your energy bills each month, and some of the most common methods include:

Depending on how you manage your money and how much energy you use, you may find different ways of paying these bills each month easier than others. It’s important that you find a method that suits you, because missing your energy bill payments or falling into arrears can have severe consequences. They could range from having a negative marker recorded on your credit file, to having your electricity cut off and being summoned to court. It can be scary and overwhelming if you’re facing the prospect of not being able to meet all of your financial commitments, and while easier said than done, it’s important to stay calm and level-headed. Ignoring any potential financial problems will only exacerbate your situation.

How can a credit line help with utility bills?

Temporary cashflow issues

A cash credit line can help in times of temporary cashflow shortfall. For example, if you had to take a week off sick and your wages were reduced. You can withdraw the funds from your online credit line and make your priority bill payments without worrying you might miss them. Then, once you’ve adjusted your budget, you can repay the balance when you receive your next full pay, or even make just a minimum payment if your cashflow isn’t fully rectified yet.

Unexpectedly high bills

Similarly to income shortages, we can experience times where our bills are higher than we predicted for one reason or another. Having instant access to cash through a credit line means you don’t have to stress when the bill arrives in your inbox. The flexible repayments allow you to repay the borrowing in a way that suits you, so you don’t have to compromise on your other financial responsibilities in order to repay the money you borrowed.

An alternative to short term credit

Payday loans can often be a go-to when it comes to unexpected emergency payments, but it might make more sense to use a credit line than instant payday loans, as payday loans charge higher interest rates, and often you are required to pay over a shorter period which might affect your existing budget. A credit line would allow you to make only minimum payments if your cashflow prevented you from repaying the full balance straightaway, and as the transfers are almost instant, you could pay the bill the same day as receiving it (even if you needed to apply and be approved first).

However, while credit lines and other forms of borrowing can help when you need urgent cash, using credit to pay for things like energy bills if your financial difficulty is long term is only likely to make your issues worse. Every now and then, you might experience higher outgoings than normal, or a small reduction in income and borrowing can help you bridge the gap between paydays. But, as living costs are on the rise in general, it’s a good time to review your current budget and borrowing habits to check that your use of credit is sustainable going forward.

The rise in living costs

Borrowing in a time of financial insecurity is always high risk because there’s little to no guarantee that you will be able to make the repayments. Missing repayments means negative information being reported to your credit file which makes it harder to obtain credit in the future and could also affect your chances of getting a mobile phone contract, a new energy tariff or even the payment methods available to you when paying your priority bills.

If you know you’re only facing a blip in your usually steady finances, then there is unlikely to be any harm in using credit to cover the difference, however if you suspect your blip is a result of the ongoing increases in fuel, food and energy, you should carefully consider if borrowing is a responsible decision. If you’re really struggling, you can reach out to free debt advice services who can review your circumstances and provide a detailed plan of action. If you’re not sure you need third party help, start by taking a good look at your current spending habits, because you might just need to cut back on a few non-essential purchases for a little while, consider changing service suppliers or cancel any unused subscriptions.

While we can’t control the rate at which our day to day living expenses are rising, we can control how we manage to meet the increased costs, even if that includes reaching out for help.

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