May
28
Our simple guide to beating debt
How you tackle your debt obviously depends on the size of your outstanding debt and the proportion to your monthly income. For some, simply making a few sacrifices, such as cutting back on paying for lunches each day; instead opting for taking pre-packed lunches and using the money to pay off a credit card, will suffice, but in more serious cases an non-lending solutions such as Debt Management Plans and IVA's (Individual Voluntary Arrangements) could be the answer.
Here are our top tips for getting out of debt...
Work it out
Sitting down and working out how much you owe can be the hardest part of beating debt. For many it is easier to leave bills unopened and burying your head in the sand, but ignoring the problem is the quickest route to County Court Judgements and creditors making claims on your property. The Consumer Credit Counselling Service warns that if debt repayments take more than a fifth of your monthly budget then you are in the credit danger zone.
Sitting down and working out how much you owe can be the hardest part of beating debt. For many it is easier to leave bills unopened and burying your head in the sand, but ignoring the problem is the quickest route to County Court Judgements and creditors making claims on your property. The Consumer Credit Counselling Service warns that if debt repayments take more than a fifth of your monthly budget then you are in the credit danger zone.
Budget
Actually writing on paper what you earn against what you spend is the easiest way of sorting out what you can and can't afford, and the only way of coming up with a reasonable estimate for your weekly or monthly spending.
Actually writing on paper what you earn against what you spend is the easiest way of sorting out what you can and can't afford, and the only way of coming up with a reasonable estimate for your weekly or monthly spending.
Add up all your income – salary, benefits and whatever else might reach your account each month – and subtract from it your rent or mortgage payments, bills and other necessities, and you'll be left with the amount you have for spending or saving each month. Use this process to also check whether you are on the correct tax code and are owed any Government benefits or tax credits that you are not currently claiming.
It is important to be honest with how much you spend each month, but also realistic. Don't pretend that you will quit smoking if in reality it is unlikely. This is Money's household budget calculator will help you form a realistic picture of your disposable income.
See where you can trim your budget, such as cutting down on the nights you go out, and be strict.
Don't keep it to yourself
Over a third of people with debt problems hide it from their partners. One of the main steps to sorting out your debt problems is admitting they exist to anyone that may be affected and following this up with action.
Over a third of people with debt problems hide it from their partners. One of the main steps to sorting out your debt problems is admitting they exist to anyone that may be affected and following this up with action.
Tackle priority debts
List your debts, then decide which are the most urgent. Those that carry the harshest penalties for default must be dealt with first. Mortgage arrears, for example, will eventually result in losing a home. Council tax arrears carry the risk of a prison sentence.
List your debts, then decide which are the most urgent. Those that carry the harshest penalties for default must be dealt with first. Mortgage arrears, for example, will eventually result in losing a home. Council tax arrears carry the risk of a prison sentence.
Speak to creditors
Although it can appear daunting, speaking to a creditor about repayment difficulties is by far the better option than avoiding the issue. Lenders are experienced in helping customers that have run into financial difficulties and will attempt to help if you are struggling with repayments.
Although it can appear daunting, speaking to a creditor about repayment difficulties is by far the better option than avoiding the issue. Lenders are experienced in helping customers that have run into financial difficulties and will attempt to help if you are struggling with repayments.
The same applies to utility companies. There are several grants and subsidies available to customers that struggle to pay energy and water bills so speak to your supplier to see if they can help. A list of what help energy companies are offering customers can be found here.
Avoid just paying the minimum repayments on credit cards. Although it is better to repay the minimum than nothing at all, in reality you are treading water and playing into the card issuer's hands. Card companies have been forced to put warnings against paying just the minimum balance on their statements and with good reason. It would take 15 years to pay off the £3,000 balance on a 14.9% APR card if only the minimum payment of £90 was made. You would nearly halve that time if you paid an additional £60 a month!!
Speak to a professional
You don't have to deal with this on your own. By utilising the professional debt solution service providers such as Magic Finance Group Ltd you can let your debts become manageable and watch the stress drop. Debt management firms effectively manage thousands of people, just like you, with their debt problems and have a great relationship with the creditors to come to an easy and quick resolution to debt worries. Don't suffer in silence or 'try to manage just because you are worried what may happen'. We can help you and protect you and your finances - even in legal situations.
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