Bad debt advice online could cost you money

Millions of people are turning to TikTok, YouTube, AI tools and online “money experts” for financial advice. But new research from Zable shows this could be putting people at risk.

The study found that 35% of people look for unregulated advice about debt repayment strategies, while 33% seek advice about debt consolidation from unofficial sources.

That’s worrying because getting debt advice from the wrong place could leave you owing more money, damaging your credit score, or even falling victim to scams.

What is debt consolidation?

Debt consolidation means combining several debts into one.

For example, instead of paying:

• a credit card
• an overdraft
• a personal loan

…you might move them into one new loan or credit card with a single monthly payment.

This can sound simpler. Sometimes it can help lower monthly payments too.

But debt consolidation is not always the right answer.

The dangers of debt consolidation

Online videos and social media posts often make debt consolidation sound like an easy fix. But there are risks people don’t always talk about.

You could pay more overall

Lower monthly payments can seem helpful. But if the debt lasts longer, you may end up paying more interest in total.

You could make your debt last longer

Spreading debt over more years can keep you in debt for much longer than expected.

You may need a good credit score

Some balance transfer cards and low-interest loans are only available to people with strong credit histories.

Secured loans can put your home at risk

Some debt consolidation loans are secured against your home. If you cannot keep up repayments, your home could be at risk.

It can encourage more borrowing

If old credit cards are cleared, some people start spending on them again. This can leave them with even more debt.

What are debt repayment strategies?

Debt repayment strategies are plans to help you pay off what you owe.

There are lots of different ways to do this. The right one depends on:

• how much debt you have
• what type of debt it is
• how much money you have left after bills
• whether you’re behind on payments

Common debt repayment strategies

The snowball method

This means paying off the smallest debt first while making minimum payments on everything else.

Once the smallest debt is cleared, you move to the next one.

Some people like this because it helps them feel motivated.

The avalanche method

This means paying off the debt with the highest interest first.

It can save money in interest over time.

Debt management plans

A debt management plan (DMP) is an informal agreement where you make affordable payments towards unsecured debts.

A debt adviser can help set this up. Just remember, a DMP means you may be in debt longer and it may harm your credit rating.

Breathing space

Breathing space is a government scheme that can pause interest, fees and contact from creditors for 60 days while you get debt advice. You can usually only get breathing space once in any 12-month period.

Formal debt solutions

In some situations, a formal debt solution may help, such as:

• an IVA
• a DRO
• bankruptcy

These are serious solutions with long-term effects, so it’s important to get regulated advice first from someone like us.

Why online debt advice can be risky

Zable’s research found:

• 68% of people don’t check the risks before acting on financial advice
• only 24% check whether someone is properly qualified
• nearly a third lost money because of bad credit card advice

The study also found lots of AI tools gave information aimed at Americans instead of UK consumers.

That matters because UK debt rules are different. E.g., advice about US credit scores, bankruptcy or savings accounts may not apply here.

Where to get safe, regulated debt advice

If you’re struggling with debt, it’s important to speak to a trusted organisation.

Look for advice that is:

• free
• confidential
• regulated or FCA-authorised

A good place to start is the government’s MoneyHelper website.

You can also check whether a company is authorised using the Financial Conduct Authority Register.

How to spot bad debt advice online

Be careful if someone:

• promises to “wipe your debts instantly”
• pressures you to act quickly
• guarantees approval
• says a solution is “risk free”
• does not explain fees or downsides
• pushes one solution for everyone
• hides that they earn commission

If something sounds too good to be true, it usually is.