It can be extremely stressful to run into financial difficulties and the ability to obtain further credit these days is ever decreasing. However daunting the prospect of debt, take control, re-evaluate and prioritise. Taking the time to reorder your finances can not only be the first step in getting out of debt, but can even save you money going forward.
Tip 1 – act now
The stress of falling behind with repayments can lead to people ignoring the problem simply because they feel unable to cope with it. The longer that payments are missed, the higher the charges will become without the debt ever reducing. If you feel that debt is getting on top of you, act immediately. There are options available to you, but these options will reduce the longer your finances spiral out of control.
Tip 2 – talk to your lender
If you feel that you are struggling with your debt repayments, get in touch with each of your lenders straight away. Explain your situation and see if you can extend the term of the lending in order to reduce the monthly payments. Some borrowing comes with payment holiday options, and if you have been paying into a PPI policy, now is the time to set the insurance cover in motion should the reason for non payment be as a result of accident, sickness or unemployment. It may be that you can be accepted for a consolidation loan that you can use to repay your existing debts leaving you with one single, easy to manage debt per month.
Tip 3 – make a budget, and stick to it
Work out what you need to live on day to day with the priority being food and travel to work. Remember that non-repayment of secured debt can lead to repossession of the home or car so this too must be high on the priority list. Next outline your monthly bills and debts and measure them against the income. If possible, make cut backs by cancelling luxuries like satellite TV or gym membership.
Tip 4 – shop around
If you have a mortgage, see if you can transfer it to a better deal. Can you sell your car, repay the finance and buy an older model outright? Shop around for car insurance deals, you may be paying above the odds simply because you haven’t searched elsewhere. Similarly, you may be owed a mobile phone upgrade, which could lower your monthly bill. By shopping around, a little saving here and there can mount up to a substantial monthly saving, which can in turn be used to pay off existing debt.
Tip 5 – take advice
Charities such as national debtline and the Step Change (formerly Consumer Credit Counselling Service) are available to offer free advice to those struggling with managing their debt. It may be that you need to enter into a plan that allows you to pay a single reduced monthly sum divided across your creditors. Although this will affect your credit rating, it will make a start in better managing your debt. Whatever the debt counsellor advises, talking to someone who can help may set your mind at ease as you will be given a path to lead out of financial difficulty.