Taking action on your finances and reviewing existing credit agreements can help you get debt-free, so you don't get trapped in a vicious circle.
Maybe you've had to resort to credit cards, savings accounts, catalogues or possibly an overdraft to finance regular outgoings lately? Now's the time to do something about it!
Here's how you can start:
1. Take stock of your debts
2. Put your budget under the microscope
Fully itemise what you spend each month. A great way to do this is on a spreadsheet, or by using a (free) budgeting tool.
3. Review what you spend – where can you make savings?
Once you've drawn up your budget, take a detailed look at your spending.
If debts are really on top of you, then the problem isn't going to go away simply by trimming around the edges of your spending – you need to be brutal and look at your lifestyle. We're not saying that you should stop going out or eating at restaurants altogether, but going out once instead of twice a month can still free up a reasonable chunk of money.
There are other areas you can look at, too. If you've got an expensive car and the finance for it is crippling you, can you sell it and buy a less expensive vehicle, perhaps by taking out a smaller loan? Or perhaps you could save on petrol and use the car less regularly, by doing a car share or cycling to work instead?
The more you can save, the more you can put towards repaying your debt.
4. Remove the temptation to get into more debt
5. Prioritise repaying your most expensive debts first
6. Repay your debts more efficiently
You may be able to save money just by shifting balances from your more expensive credit cards to your least expensive card. This also goes for any store cards, which tend to be more expensive than the standard interest rates charged by credit card providers.
Ideally, be on the lookout for cards that offer a 0% balance transfer deal – if you're really struggling with debts you may find it difficult to be accepted, but you might get an offer from one of your current providers, so pay attention to any marketing you receive from them.
7. Automate your debt repayments
Eliminate the risk of forgetting your debt repayments by automating them.
A standing order will let you pay a set amount on a set date of the month, and most credit card providers will allow you to pay in this way.
You should find instructions on whether your card provider accepts payment by standing order as well as how to set this up on the reverse of your credit card statement. You'll want to set the standing order so it covers at least the minimum payment, and ideally, you'll want to pay off even more.
8. Move debt to a 0% balance transfer credit card (if you're disciplined)
Applying for a long 0% balance transfer credit card can be a good idea, as it can give you the opportunity to pay off all, or a large chunk, of your debt without paying interest on it for an initial period. You will have to pay a balance transfer fee to move debt across (typically up to 3.0% of the amount you transfer), but this is still cheaper than having debt charged at upwards of 16% per year!
Watch out though, as another credit card means an extra credit limit – more money that you could borrow if you're not disciplined. So close any cards you don't need to make sure you don't rack up further debt.
9. Think about a personal loan (if you're worried about taking out another credit card)
A personal loan can work out more expensive than a 0% interest credit card, but has the big advantage of a set end date and a very real light at the end of your debt tunnel.
10. Stay motivated to get debt-free
Although it's never exciting repaying debt, getting out of it will be, so make sure to keep yourself motivated to help you reach your goal.
Setting yourself regular targets and rewards could be a great way to do just that. When you repay your first £1,000 of debt, for example, you could reward yourself with a well-earned restaurant visit or some other kind of treat.
Try not to get stressed about your debt, either. It's only money after all – the most important thing is your health. Getting outdoors regularly for a walk, jog or just to go cycling with the kids can really help you think your problems through and put perspective on things. It may also help to talk about matters with close friends and family.
11. If you think you're in over your head…
There's no debt problem that can't be solved, even if you're apprehensive about the measures you may need to take. But with debt you can be sure that the longer you leave a problem unaddressed, the worse it will get.
12. Act early
Talk to a charitable organisation such as those listed below and you can be sure of honest, supportive and balanced advice.
Compare 0% balance transfer credit cards Compare loan repayments and interest with our easy-to-use loan calculator Dealing with debt
Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use of or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.
Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.
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