SimplyFinance - Debt

Don't Keep Your Bank in the Dark

2010-09-02T23:00:00Z

If you recently experienced a change in your financial circumstances, did you choose to contact your mortgage, account or credit card providers? New research commissioned by credit reference agency Callcredit suggests that most of us would decide to keep the news to ourselves, possibly to our detriment.

The study shows that only 30% of people would inform their bank or building society if they found themselves in financial difficulties, leaving 70% who would choose to keep financial service providers in the dark.

The research also reveals that 65% of British adults have experienced some degree of change to their financial situation over the past two years, and that those with children have been particularly affected. 24% of respondents who had experienced difficulties in their finances saw their income suffer: with 6% having to take a pay cut, 9% having their working hours cut shorter and 9% losing their job.

But how many of these respondents actually sought help with debt? A surprisingly small 8% of people contacted their bank or building society straight away when they received the news. However, it took an average of two months for people to break the news to their banks, and even then, 8% of these bank customers admitted to not being entirely honest about their situation.

Only a further 8% of people contacted the Citizens Advice or a debt charity when they realised that their financial situation was taking a turn for the worse. The problem with keeping quiet when you could be at risk of financial difficulty is that your bank, in its capacity as mortgage lender, credit card provider or current account provider, cannot offer any support.

"These figures are extremely worrying," said Graham Lund, Managing Director of Callcredit. "What's particularly concerning is the number of people who fail to make their bank aware of sudden changes in their financial situation - and those that do get in touch aren't always completely honest.

It's therefore extremely important that financial service providers use information and tools available to proactively monitor any changes in their consumers' financial situation and have sight of the bigger picture."

If you are experiencing financial difficulty, consider calling your bank and making them aware of the situation. If you give them early warning, they might be able to offer you a lower rate of interest on your credit card debt, a more realistic repayment plan for your mortgage or a more suitable current account. Be as open as you can, as they may well be able to offer you advice and support to help you overcome the difficulty.

By alerting your bank or building society to potential issues, you might also be able to prevent damage to your credit rating, something that will benefit you when it comes to taking out loans or other forms of credit in the future. If you want to check your current credit rating, you can call one of the UK's credit reference agencies, Callcredit Information Group (0113 244 1555), Equifax (01274 759759) or Experian (0115 9356700). This should only cost you a few pounds.

If you would like to talk to a debt specialist about financial issues that you are having, simply fill out our short debt management form and an advisor will contact you quickly and confidentially.

How long will it take to pay off your Summer Holiday?

2010-07-08T23:00:00Z

Everyone loves a summer holiday, but it seems that some of us are willing to sacrifice our financial wellbeing for a mid-year break. New research by protection specialist Bright Grey has found that UK adults plan to borrow over 12 billion GBP in total to fund their summer holidays this year, and that 10% of us will take two months or more to pay off holiday debts.

Of the UK adults surveyed, 32% are planning to borrow money in order to get away. This equates to a total of 10 million holidaymakers over the course of the summer. The borrowing will either take the form of credit card debt, a travel agent's payment plan or a loan from friends or family.

The average spend on a summer holiday is over 1,200 GBP, and over half (58%) of the respondents claimed that they do not have the money available to repay the debts straight away. If the holiday is being paid for on a credit card, this could add an additional 100 GBP of interest a month to the cost of the holiday until the debts are repaid - based on credit card borrowing at the average UK APR (annual percentage rate) of 18.7%.

Although the average summer holiday apparently takes 4.3 months to organise, there is still time to save yourself from a post-holiday debt hangover. Firstly, if you are planning to use a credit card to cover some or all of your holiday costs, try and improve on your credit card interest rate ahead of your trip.

Depending on your credit rating, you might be able to move to a card with a 0% introductory rate on purchases. If you do not qualify for one of these cards, you may still be able to move to one with a lower interest rate than you pay with your current provider. Compare credit card deals here, and remember that you should plan to pay off the debts before the end of your introductory rate to avoid hefty interest charges.

To avoid getting charged fees for credit or debit card usage abroad, and to ensure that you do not go over budget once you're away, consider loading a prepaid credit card with enough money for the trip. A prepaid card is a secure way of taking money abroad, that can be used as an alternative to travellers' cheques. Some good news if your credit rating has taken some knocks is that providers do not require credit checks.

There are other ways of avoiding unwelcome expenses on your summer holiday. As 9 in 10 Britons do not plan to travel outside of the Europe this year, the majority of UK holidaymakers will be able to benefit from the European Health Insurance Card (EHIC), which enables travellers within the EU, or Iceland, Lichtenstein, Norway or Switzerland to receive free or cheaper medical treatment that becomes necessary. Apply for a free card via their website.

You should also make sure that you have the correct travel insurance for your trip even if, like almost a third of Britons, you are planning a holiday within the UK this summer. Get a great deal on your travel insurance here.

Roger Edwards, proposition director at Bright Grey said: "Getting away on holiday can be a high point of the year for many people, however with one in three borrowing to pay for their getaway, it is important to make sure they don't end up with a financial holiday hangover on their return. Planning ahead for the future financially can help avoid using expensive emergency measures to cover them for the short-term and also mean that everyone can enjoy the sun without the grey cloud of debt hanging over their heads."

Credit Card 'Negative Payment Hierarchy' is Bad News for Consumers

2010-03-27T00:00:00Z

When used as a source of short-term advance cash, with the intention to repay the amount in full as soon as possible, credit cards are a useful form of financial support. However, with credit and store cards becoming increasingly commonplace in the UK, consumers are constantly under a huge amount of pressure from credit card companies to spend on their cards on an everyday basis and accumulate debt irresponsibly. The pervasive nature of credit cards can be seen in the huge number of card holders; in 2009, there were 30.3 million credit card holders holding 58 million credit cards, according to figures from the UK Cards Association.

However out of control spending is not the only cause for concern. In what is called a culture of 'negative payment hierarchies', credit card providers tend to reclaim the cheapest debt first, leaving the more expensive, high-interest debts racking up more interest on cardholders' balances. This practice incurs additional interest totalling 300 million GBP a year for consumers. In fact, around 80% of credit cards (178 out of 225) allocate debt repayment in this way.

According to Defaqto, the independent financial research company, companies normally expect consumers to pay back credit card charges in the following order (lowest to highest interest):

1.   Default Charges (for missing a payment or paying late)

2.   Promotional balance transfers

3.   Promotional purchases

4.   Purchases, balance transfers and other charges

5.   Cash withdrawals

In addition to this, credit card debt is most likely to increase to unmanageable levels when consumers that only pay the minimum amount due on their balance. Most of the time, consumers aren't informed that this is the most inefficient, expensive way of paying back debt. In fact, paying only the minimum amount due each month is so inefficient that someone who pays a minimum 2% monthly repayment on a card with a 1,000 GBP balance would take around 37 years to completely repay it.

"Guidance on increasing minimum monthly repayments to ensure credit card debt is paid off more quickly is important," said Peter Harrison, credit card expert from moneysupermarket.com. "Consumers need to understand the implications of paying just the minimum payment on their credit cards."

Teresa Prichard from the Citizen Advice Bureau feels that it is unfair for credit card companies to do this. "The level of minimum payments has not always enabled consumers to keep up with the interest, let alone repay some of their borrowing," she says. "And it has not been fair for the companies to decide whether to allocate payments to the cheapest or most expensive borrowing on the card."

If you are unsure in what order you are credit card debt is currently being paid back
The importance of education and asking your bank on these issues is key to not fall into the debt trap. The Government is drafting a plan to increase fair play in banks, forcing them to act in the consumer's best interest.

The Truth about Wiping Out Your Debt

2010-05-27T23:00:00Z

Think about how much debt you have. Now think about how much of that is made up of late payment fees, interest charges and time spent on hold on premium rate numbers. It's time to take action to pay off your debt quickly and effectively, and here's how.

If you owe 5,000 GBP or more

If you have more than 5,000 GBP of unsecured debt and you owe money to two or more separate companies, you may be eligible for a debt management plan. Of course ideally, your very first step should be to call up the companies (your creditors) yourself and try to negotiate a realistic repayment plan. They should be willing to help, either by reducing or freezing interest charges, because you're taking positive action to repay them.

However, if communication has broken down between you and your creditors and you are unable to negotiate with them, a debt management plan may get you the resolution that you need. This is managed by a debt specialist who will liaise with your creditors on your behalf and negotiate a repayment plan. They will go through your monthly incomings and outgoings and establish the amount you have left after rent or mortgage payments and household bills have been taken care of. This amount, known as your disposable income, will be used to pay off your debts.

The main advantage of a debt management plan is the relative peace of mind that it provides. Rather than juggling multiple repayments, you only have to make one monthly payment to the specialist based on what you can afford. You pay the money to the debt specialist, who then distributes the payments among your creditors. Getting harassed by creditors? You can direct calls and mail to the debt specialist to deal with. It's worth noting that this service incurs a fee, unless you go to a charity. However if your debts are currently unmanageable, the cost may well be justified.

Click here to request a confidential callback from a debt specialist today.

If you owe 15,000 GBP or more

If you have 15,000 GBP or more of unsecured debt, you may actually qualify to wipe out up to 75% of that debt. This is not a quick process and it requires a certain amount of commitment on your part, but after a period of five years you are guaranteed to have the outstanding debts cleared.

This type of debt solution is known as an Individual Voluntary Agreement or IVA, and it comes with certain conditions: you must have at least 200 GBP of disposable income (what is left after bills etc. have been paid each month), and you must owe money to 3 or more creditors. If you're in Scotland, the equivalent is a Trust Deed - which is very similar except that the minimum debt requirement is 10,000 GBP and the Trust Deed usually lasts for a three year period.

If you qualify for an IVA, you appoint a licensed Insolvency Practitioner (IP) to manage your case. As with the debt management plan, the first step is to identify exactly how much you owe and how much you can afford to pay back each month without struggling financially. Then the IP draws up a repayment proposal with your approval, and takes it to your creditors. As long as the majority of your creditors agree with it, the IVA becomes legally binding.

Your creditors are no longer able to contact you directly, and are forbidden from taking legal action against you because of the money you owe them. You will have set monthly payments, and as long as you make these payments in full and on time, you will be discharged from your IVA at the end of the 5 year period and your remaining debts are cleared. Although your credit rating is affected by an IVA, this process does not last as long as bankruptcy and you can usually keep your house and other valuable assets.

Click here to request a confidential callback from an IVA specialist today.

Make your Money go Further in 2010

2009-12-22T00:00:00Z

It looks like we may be coming out of recession finally but we're not out of the woods yet. Make sure you're a money winner this year by following these simple steps to financial freedom.

Step 1 - Watch the sales

The January sales can be a great time to pick up bargains but they're also a danger area if you're not careful. So:
*    Do your research before the sales and only go to buy specific things. Don't go looking for any old bargain because that's what you'll end up with - something that's marked down that you didn't want and won't wear.
* Go for big products like sofas, washing machines and so on. If you need to furnish your home, this is the time to do it.
*    Go for Christmas things like cards, wrapping paper and gifts for next Christmas. These goods are often at least half price in the sales. Tuck them away and you'll be pleasantly surprised next December!
*    Remember that your usual rights hold true during the sales which means that if you buy something that is faulty - and you don't know that it's faulty when you buy it - you can get your money back or a replacement. However, shops don't have to refund you if you just don't like something anymore.

Step 2 - Get out of debt

It's more important than ever to get out of debt as fast as possible. If you haven't faced it yet, make January the time to start your way towards freedom from debt. This is the time to look at all your outgoings and see where you can cut them down or switch to a cheaper option.

Look at your various debts and see if you could switch any of them to a 0% credit card or low lifetime balance card. List your debts for yourself according to how expensive each one is (in other words, what their APR is). Then each month, pay as much as you can into the most expensive one and just pay the minimum on the others. Keep doing that until you are down to nothing.

If it all seems too much to bear on your own, get free, professional help from:

*    the Citizens Advice Bureau (www.citizensadvice.org.uk),
*    The Consumer Credit Counselling Service (www.cccs.co.uk)
*    National Debtline (www.nationaldebtline.co.uk)

and join the Moneymagpie debt-busting plan where we send free emails to you to help you get out of debt.

Step 3 - Live a simple life and take advantage of discounts

One of the better aspects of the recession is that it has made us lose our appetite for the rampantly consumer lifestyle we've been into for the last twenty years. Now, it's cool to be thrifty. So embrace the new cool and live a simpler, cheaper, happier life.

* Haggle. Yes, haggle in shops every time you go in. Even high street stores will consider a discount now if you pick the manager and ask nicely enough. If you can't get a discount see if they will throw in free delivery or maybe two for the price of one.
*    Make sure you get a discount on everything. Sign up to a few discount voucher sites and trawl through to find bargains (there's a lot of rubbish on all the voucher sites but there are a few gems hidden there). Also sign up to the Moneymagpie.com 'Bargain Alert' which sends the latest bargain news to your inbox.
*    Recycle everything you can including old envelopes (for writing lists), clothes (darned, re-made or cut-down to make cleaning cloths), jars (for home-made jam or for storage) and so on.
*    Get into energy efficiency including insulating your loft, putting the thermostat down and plugging all gaps around doors and windows to stop drafts.
*    Don't send greetings cards, send e-cards and tell everyone it's because of your 'carbon footprint'. For just £7.25 you can send as many delightful, all-singing, all-dancing ecards as you like, all year, from Jacquielawson.com.
*    Ditch your expensive gym membership and save on bus and train fares by walking and cycling to the shops, to work or anywhere you need to go. Once you get in the habit you will find the pounds drop off your waistline and fall into your wallet without your even noticing it!
*    Get free holiday accommodation by doing a house-swap. Join an agency like Homeexchange.com to swap with other families all round the world. This means you can have a fabulous holiday somewhere lovely and hot for just the price of your plane ticket
*    Get free entertainment by being part of the audience at your favourite TV shows. Sign up to the BBC website and Lostintv.com.
*    Make free phonecalls anywhere in the world using Voip (Voice over IP) technology. Join Skype for free, make sure your friends do too and you can talk for hours through your computers for nothing.

Step 4 - Plan for your future

It's more important than ever to think about your financial future and invest wisely for it. Don't waste time or effort asking your bank manager for advice. You will just be sold some under-performing products that make them money. Follow this system:
1.    Save - you must first make sure you have enough money set aside in a savings account to cover all your essential bills for at least three to six months, in case you suddenly can't earn.
2.    Diversify - you don't have to just have a pension for your retirement. In fact it's best to put money in a variety of products including pensions, stock market investments, property, bonds and even collections.
3.    Use the tax breaks - pensions are useful tax vehicles because the government puts in the tax you would have paid on the money you invest which is great for high earners. Also, use up your ISA allowance each tax year. Remember, in April it goes up to £10,200.

_____________________

Jasmine Birtles is founder of Moneymagpie.com. Join their free, weekly newsletter here for money-saving and money-making tips straight to your inbox every week.

Debt Help Types

2010-06-07T23:00:00Z

When debt causes trouble, it has to go. In order to get out of debt, a series of methods can be used. These methods can be homemade or accurately calculated by companies. Depending on the depth of the problem, more and more complicated methods and systems have to be used. Everyone has debt to consolidate and this can only be done with good money management.

Everything begins with good money management. The simplest debt help someone can get is tips and tricks on how to manage their finances. This type of debt help is free and is useful for those who want to manage their debt on their own. Good money management means putting the money always where it is needed the most and also saving it where it is possible.

Debt management can have other forms, too. By other words there are companies that offer to make a debt management plan for those who have debt problems. For such a plan you have to pay, but it is a great help. A good debt management plan is like the Bible. It has to be followed letter by letter so it can have a beneficial effect.

The next step in debt help is using the services of a company that manages debt. Companies offer full money management, meaning that they do everything for their client. The client just has to pay a monthly fee and the company will try to negotiate with creditors to lower interest rates. This way the company can pay all the payments and still remain with some money. This method is easy and comfortable, but it is also more expensive.

Depending on the pocket of the client, services can vary from simple information to counseling and full money management. Even the simplest information that helps a person manage debt better is considered debt help. Companies offer many services, including information giving and full debt management.

The types of debt help are various, but no one can deny that debt help is necessary. Usually people do not have the time or the necessary mathematical knowledge to solve their own debt problems. Some types of debt help save time and some offer the necessary calculations. Everyone has to pick the right type for their needs. For example there are people who have the necessary knowledge to manage their money well, but they do not know enough mathematical knowledge to do so. A simple debt help can make this person solve this problem.

New Mums Forced Back to Work by Debts

2010-06-17T23:00:00Z

As a new parent, the decision about when or whether to go back to work can be a difficult one. However, a surprising number of new mums in the UK are being deprived of the choice because they cannot afford to stay on maternity leave, according to new research.

The research, carried out by comparison website uSwitch.com, highlights not only the rising costs of having a baby but also the fact that many new parents are unprepared for the financial burden of their new family. Tellingly, over half of new mums (52%) return to work because of financial constraints, compared to the 22% who do so because they wish to continue their career. Four in ten new mums choose to take a pay cut in order to work part-time.

During maternity leave, there is apparently a 34% drop in the average net household income from 3,431 GBP to 2,266 GBP per month. At the same time, the increased costs of preparing for the new arrival can weigh heavily on the remaining income, with an average of 2,521 GBP being spent on baby items during maternity leave. This amounts to a whopping 90% of the take-home pay.

56% of the new mums surveyed did not feel that they were sufficiently well prepared for the combination of new baby expenses and a reduced household income. Only a quarter of respondents had enough money saved in advance to see them through their maternity leave without racking up debts, and less than 10% were able to rely on their partner's income to support them.

Surprisingly, almost three in ten new mums (29%) say that they were not aware of their company's maternity package before they took maternity leave, with a further 30% deciding to have children in spite of the package they have been offered due to the perceived time pressure of not wanting to have children too late. Four in ten new mums get into debt during the time in which they are on maternity leave, with an average debt of 1,329 GBP being racked up.

Ann Robinson, Consumer Policy Director at uSwitch.com, says: "Preparation is key for those planning a family. Check out your company's maternity policy, calculate how much you will need to survive, save money in readiness and cut down on household bills and unnecessary expenses. By keeping a tight lid on your household budget hopefully you will remember your maternity leave for the right reasons and not for the financial headache and debt it can bring."

Are you worried about your debt? Request a confidential callback from a debt specialist today.

Credit Action Launches Money Advice Map Service

2010-03-03T00:00:00Z

Money education charity Credit Action has just launched a service to make it easier for people in financial difficulties to seek help. The Money Advice Map is a new Internet search facility that enables users to search for their nearest money (or legal) advice centre simply by entering their postcode. For added convenience, the listings for each centre will also include details of the centre's opening hours.

Chris Tapp, Director of Credit Action, comments, "Commercial operators have the budget to advertise and market their services whereas charities are more likely to rely on word of mouth and local awareness. The Money Advice Map will enable people to know what sources of free help and advice are available locally." Currently the Money Advice Map incorporates over 6,000 money or legal advice centres, and this number will grow over the coming weeks as more partners join.

As Credit Action's Debt statistics from March show, the average household debt in the UK currently stands at 58,040 GBP (including mortgages). Interest repayments on personal debt such as credit cards and unsecured loans have reached 68.3bn GBP in the last 12 months, with an estimated 187m GBP paid in interest every day.

As an indication of the scale of the issue, an average day sees the Citizens Advice Bureau (featuring on the Money Advice Map) dealing with 9,500 new debt issues and 1,841 people made redundant. A property is repossessed every 11.4 minutes, and someone is declared bankrupt or insolvent every 3.69 minutes.

It is so important that if your debt is getting out of control you acknowledge the problem. In some cases, you may be able to get your finances back on track by careful budgeting and talking to your creditors to make manageable repayment plans. See Credit Action Director Chris Tapp's advice about talking to creditors "Approaching the Debt Dragons".

Visit the Money Advice Map to find the nearest help centre in your area, or read through the Debt articles on the SimplyFinance website for more information about the solutions available to help you get back on track.

Don't Ignore Your Debt

2009-09-01T23:00:00Z

In today's society, debt is a part of everyday life. House prices are at such a level that most people would not be able to buy a house without the aid of a mortgage, and bank overdrafts become a habit for many from their teenage years onwards. However, there is a massive difference between necessary debt (mortgage, student loans) and destructive debt that ties you into paying back the same loan or credit card for years after you first needed the money.

Credit Action, a money education charity, recently found that £181m is paid in interest in the UK each day, and that a property is repossessed every 11.5 minutes. These are worrying figures, indicating a level of personal debt that is becoming increasingly unmanageable. A common reaction to excessive debt is to pretend that everything is fine. However, ignoring the problem will only make it worse. A greater awareness of your financial situation can mean cutting your interest payments in half and avoiding serious repercussions like losing your house.

Face up to the debt

It's easy to get into the habit of spending beyond your means, especially if you spend a lot of time with friends or family members who earn more than you do. However, credit is not bottomless and your creditors will soon lose patience if you continually borrow more than you are able to pay back. It seems obvious, but you have to start by admitting that your debt has become a problem.

Write a list of the people or companies that you owe money to, and work out how much interest you pay to each company per month. The debts with the highest interest rates are the ones that will get you into the most trouble, so these need to be your focus. Also, unwilling as you may be to admit to others that you have debt issues, your lifestyle needs to change immediately. That means no more expensive nights out, new clothes and grocery shopping in Harrods, at least until you're earning enough to afford it.

Don't ignore your post

If you 'forget' to open the bills that come through the letterbox, your creditors are not going to go away. In fact, the pressure on your to make your repayments will only increase, and you will soon be bombarded with telephone calls from debt collection agencies.   Some can be pretty aggressive in their communications, so try and sort something out before it gets to this stage.

Look over your bank statements and work out where cutbacks can be made. Be ruthless and cut any 'luxury' spending such as magazine subscriptions and Sky TV. When you know how much money you have available to start paying off your debts, call everyone on your creditors list. Starting with the ones to whom you owe the highest-interest debts and the ones where you have missed the largest number of payments. Explain that you have been having some financial trouble, but that you want to sort out the situation.   They should respect the fact that you are being proactive, and either agree to freeze your interest or enable you to make manageable payments towards your outstanding debt. If they are unhelpful at first, do keep trying. It might take a couple of phone calls to get through to someone sympathetic.

If communication has broken down completely, you may need to resort to a debt management plan or an Individual Voluntary Agreement (IVA), where a debt specialist liaises between you and your creditors to put together a repayment plan. Do be aware though that both a debt management plan does cost money, so if you are considering this route make sure you also contact a free service such as the Citizens Advice Bureau to find out what services are available to you. Also, the consumer credit counselling service is free to call on 0800 1381111. For Scottish debt solutions, please follow the link.

Keep a record of everything

If you have a large number of creditors, chances are that you will be speaking to a lot of different people. Make sure that you always get a reference number for each call and if possible the name of the person that you have spoken to. When you get letters and phone calls, keep the letters in a file and make a note of the dates, times and content of the phone calls. The reason for doing this is to protect yourself if you should have to go to court.

One way for companies to reclaim money that they are owed is to apply for a county court judgment (CCJ) against you. This means that you will be summoned to your local court and, if you lose the case a judge will order you to pay back the money. This type of judgment is recorded on your credit report for six years, so if it gets to this stage you may have trouble borrowing money in the future ? so do your best to sort out the situation before this happens.

If it seems too good to be true?

Although debt consolidation loans can be a temporary solution to high-interest debt, you should be extremely careful about choosing this option. After all, you are effectively swapping one debt for another. If you do decide to go down this route, you need to commit to making every payment in full and on time. There is one situation where you should consider this option; when you have credit card debt or another type of high interest short-term loan and you are stuck in the 'minimum payment' vicious circle.

Credit cards in particular are happy to let you make a minimum payment each month (usually £5) because you are then paying off the interest and therefore stay in debt much longer.   The longer that you don't pay off any of your balance for, the harder it is to do because the interest mounts up. Therefore, if you are unable to ask family or friends for help and simply do not have the funds to pay off the cards, a longer term loan with a lower interest rate will give you some breathing space, and preserve your credit rating.

5 Steps to Beating Your Debt

2010-05-19T23:00:00Z

In today's society, debt is a part of everyday life. However, there is a massive difference between necessary debt (mortgage, student loans) and destructive debt that ties you into paying back the same loan or credit card for years after you first needed the money. Here are 5 steps to beating your debt.

1. Admit that Debt has become an issue

Spending beyond our means is something that most of us do from time to time. However, it's important to balance this out by spending a little less the following month, otherwise you'll quickly find yourself at the bottom of your overdraft and asking for an extension. Your bank and other creditors will soon lose patience if you continually borrow more than you are able to pay back.

Write a list of the people or companies that you owe money to, and work out how much interest you pay to each company per month. The debts with the highest interest rates need to be your initial focus. Also, you need to make immediate changes to your lifestyle to start paying down your debt. Look over your bank statements and work out where cutbacks can be made - be ruthless, it's not forever.

2. Open all of your post...bills included

If you 'forget' to open the bills that come through the letterbox, your creditors are only going to get more persistent - and in serious cases they will pass the debt on to a debt collection agency - some of whom can be pretty intrusive. Work out how much cash you have each month that can be used for repayments then call everyone on your creditors list, starting with the high-interest debts.

Explain that you have been having some financial trouble, but that you want to sort out the situation. They should respect the fact that you are being proactive, and either agree to freeze your interest or enable you to make manageable payments towards your outstanding debt. If they are unhelpful at first, do keep trying. It might take a couple of phone calls to get through to someone sympathetic.

3. Keep a record of everything

If you have a large number of creditors, chances are that you will be speaking to a lot of different people. Make sure that you always get a reference number for each call and if possible the name of the person that you have spoken to. Keep all paper correspondence in a file. The reason for doing this is to protect yourself if you should have to go to court.

4. Beware replacing debt with more debt

Although debt consolidation loans can offer temporary respite, you should be cautious about choosing this option. After all, you are effectively swapping one debt for another. However, if you have credit card debt or another type of high interest short-term loan, and you are unable to ask family or friends for help, a longer-term loan with a lower interest rate can give you some breathing space, and preserve your credit rating.

5. Get professional help

If communication has broken down completely, you may need to resort to a debt management plan or an Individual Voluntary Agreement (IVA), where a debt specialist liaises between you and your creditors to put together a repayment plan. Do be aware though that both a debt management plan does cost money, so also consider a free service such as the Citizens Advice Bureau.

If you'd like to speak to a debt specialist, simply fill out our form and request a free callback.