If you’re facing a debt problem, it can be really daunting. However there are a few things you can do to regain control of your debts. I’ll give you some pointers for how you can manage your finances better in the future.
We now need to put pen to paper. Or, if you're computer savvy, create a spreadsheet that you can keep updated as you go.
You need to start by having a look at your debts: list them all, note them down by company, how much you owe each company and more importantly, what the interest rate is. You can look through your bank statements and the bills you receive from each company to help determine which priority they should be paid in.
What you need to do now is look at your budget. If you don’t already have a budget, now is a good time to create one. This will help you determine what your outgoings and incomings are. And it will help you determine whether or not you can alter them so that you can start to make some payments toward your outstanding debts, to help get rid of you debt much quicker by freeing up some spending.
What you’ll need to do now is look at your expenditure. Look at those pricey things, like the coffees, the takeaways, all those things that add up, and use that money to actually pay off the debt much quicker.
Once you've determined how much you can afford to pay toward your debt each month, talk to the companies involved to see if you can make those arrangements. Try to do it from the budget you have already set yourself. That would be the best possible option, however if that is not possible, you may need to borrow in which case you’ll need to ensure it is right for you and that it fits your budget.
Some debt is short-term; this could be some extra borrowing for Christmas, birthdays, or holidays. Your bank will consider giving you an overdraft which will help you with your short-term finances. You do need to realize, of course, that this will incur interest. If you go over your limit, there may be a charge. Also, do bear in mind that this is not extra money for spending, this is just short-term.
Another option to think about to help you manage your money is to consolidate your debts. If you have a couple of credit cards, people often put them together into one. Credit cards with a free balance transfer make it easy for people to do this, and that way, you'll only have to pay one company, not many.
If your budget lets you, make sure you pay more than the minimum amount each month. That's the only way you'll start to see your debt get smaller.
Now, credit cards often have a higher interest rate after any introductory promotion, so you might consider consolidating your debts using a bank loan. Not only does this make your repayments more manageable, but it could also help you stay on budget.
But with a bank loan, you could be paying it off for a longer period of time depending on the interest rate, this type of loan could cost you more in the long run, so make sure you weigh up all the pros and cons.
And just in case you're tempted to hold onto some savings instead of paying off your debt, consider this: If the interest rate you're getting on your savings is less than the one you're paying on what you owe, then you might just be better off repaying your debts first. You can always start saving later once you're debt-free.
Many of us will borrow some money at some point in our lives. It’s important that we do this sensibly and that we don’t let our debts spiral out of control. By ensuring that you always make your repayments on time, you will have a good credit rating. However if you over-stretch yourself and miss some payments, it is possible that it could damage your rating.
Why do we need to be interested in our credit rating? Companies that we ask to lend us money for things like mortgages, credit cards and loans will use the credit rating information to determine whether or not they are prepared to lend to us. It’s a good idea to get a copy of your credit rating report. This will just cost you a few pounds, and will contain all the information you need to know about your credit rating. If you find when you get this report that there’s something on it which is not quite right or isn’t accurate, there’s an opportunity for you to take some action and put this right.
Now, I won't pretend it’s easy to get out of debt. It takes a lot of willpower and persistence. But, your banks and your lenders will help, so please do to get in touch with them.
There are some key steps you need to take now:
Once free of debt, stick to your budget so that you'll stay that way.