There are many agencies and services out there that will help you deal with your debt problems. Some of these are charities while others will expect a fee. However, many people prefer to deal with their debt personally and in private. Here, we give you advice on the steps to take to deal with your own debt problems.
The secret to getting out of debt, or avoiding it in the first place, lies in good money management. In an age when credit is easily available to all, it takes a certain amount of willpower to spend within your means and avoid splashing out with your credit card. If you find yourself struggling with debt, the best way to deal with it is to come up with a realistic budget and stick to it.
The first thing to do is make a list of all your incomings. This should include your weekly or monthly wage and any other sources of income you have. Then make a list of your outgoings: rent/mortgage repayments, food, utilities, entertainment, etc. Examine these outgoings carefully and see where you can save a few pennies. Try some of the following tips for saving money.
Money Saving Tips
- Join the loyalty card scheme at your local supermarket. Stores offer you points on your loyalty card every time you shop there which can save you money in the long run.
- Sell your old stuff. Do a clear out of your belongings, and try to sell what you don?t want or need on eBay.
- Examine your bills closely. See how you can cut down on costs. Try buying energy saving light bulbs or see what cheap/free telephony services are available on the internet. Basically, cut corners wherever you can.
- Shop around for cheaper insurance, and see if you can negotiate lower mortgage repayments. Many mortgage providers offer mortgage holidays that might help you get back on track.
- Do your shopping at the supermarket rather than the local grocery store, as they are significantly cheaper.
- Try to limit your social life to one night out per week and/or look for cheaper alternatives.
Hopefully, some or all of these tips will make your financial picture look a little less daunting.
The next step is to subtract your outgoings from your incomings and figure out exactly how much you can spend on repaying your debts. It is also wise to put a little money aside for unexpected costs, such as emergencies, etc.
With a bit of luck, your new budget will leave you with enough left over to start paying off your arrears and to allow you to keep up with repayments. If not, you will have to come up with another solution.
One option is to consolidate your debts. To do this you should first make a tally of how much needs to be repaid on all your debts, excluding your mortgage, if you have one.To consolidate your loans you will need to borrow this amount, clear your debts and then begin repaying the loan with one easy repayment each month. However, because you are already struggling financially, banks will be reluctant to give you a loan.
You will have to offer up some kind of security against the loan, such as equity on your home, if you already have a mortgage. If you cannot, or do not wish to, consolidate your debts in this manner you will need to contact your creditors and negotiate a realistic repayment plan which you can afford and which they will accept. It is best to contact them in writing explaining why you need to reduce payments, detailing how much you can pay. With some negotiation you should be able to work out an arrangement that suits all parties.Once this is done, all you have to do is keep to your budget and keep up with repayments. Here are some tips for achieving this:
- Set up separate bank accounts for living costs, debt repayments and savings. Allocate the appropriate amount to these accounts as soon as you get paid.
- Choose an easy payment method. Maybe you can pay over the internet or at your local post office. The more convenient the better.
- Shop around for the cheapest bill payment method; some charge a fee.
- If you do miss a payment, contact the creditor immediately, explain the reason for missing the payment and come to an arrangement to make up the missed payment in the future.
It may take a little more will power and self-motivation, but there is no reason why you can not overcome your debt problems. However, there is plenty of help and guidance available which you shouldn?t be afraid to make use of if you run into trouble.