Conquer your personal debt and take control of your finances
Debt can be a very frightening problem for a lot of people. With over one trillion pounds (£1,000,000,000) of debt currently held by UK residents, one thing is immediately clear: You are not alone!
This page has been written based on my own personal experiences. Whilst I make no guarantees that the tips given on this page will eradicate your debt overnight, I do hope they will help you clear your debts quicker.
Debt can completely take over our lives. You can't see beyond meeting the next minimum payment for your card; the catalogue company want last month's arrears; the bank want you to repay your overdraft; you've ran out of payment breaks on your personal loan; it's a five-week month and it's 3 weeks until payday but you've got no money left... and that's just the start! And that's just with one credit card, and one loan...
Dealing with debt on your own is never a good idea. You will block things out, and convince yourself that everything is OK. It becomes very easy to forget to keep checking the big picture to see exactly where you stand and to prioritise your debts. Even just having a friend to confide in and help you work through things can make a difference. They're not likely to offer to settle your debts for you, but when things get bad, at least you've got someone there who understands what's happening.
It can take a long time to reach the point whereby you can 'come out' and share your problems with someone else. It's a huge step to take after you've kept everything bottled up for so long, but it really does help.
I am speaking from personal experience as I write this page, but having 'been there, done that' (and not wishing to ever try it again) I would like to think that I have now learned from my mistakes. If any one of my tips below helps you, then I'm happy!
Above all, remember, you WILL get there!
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People always think the first thing you should do is find a lower-rate loan or a 0% interest balance transfer card. Unfortunately, if your debt is really getting to you, it's likely it's already got to your credit file, too. So it's unlikely this is going to be worth the effort as a first port of call. Applying for, and being declined for credit won't do you any favours at this stage.
If you're credit history is good, but you just want to transfer your balance to a 0% card, click here. You also might want to get a before you consider applying for any more credit. -
So, first of all, write everything down - who you owe money to, how much you owe, the interest rate you're being charged and the minimum payment each month.
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Before going any further, sign up for a free 30-day trial of CreditExpert from Experian. This will allow you to see exactly what damage has been done to your credit rating. To get the 30-day free trial, use the tall banner to the left of this page.
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Work out how much money you need to live off. Include food, utility bills, council taxes, mortgage/rent payments, travel expenses and anything else you need to get you day to day. Work out the total and write this down.
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See if you can save money straight away. Get rid of any luxuries you may currently be enjoying: paying for Sky/cable TV - there's plenty of free channels available; going out every Friday/Saturday night - imagine the party you can have when you've paid off your debts; internet connection at home - consider cutting back to dial-up for a while or use the library or works computer; snacks at work - make yourself a sandwich at home and buy multi-pack crisps as pre-pack sandwiches and lots of single packets cost a fortune over the course of a week. These are just a few examples. Cut back on a few things and you'll notice a considerable discount in the money you have available.
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Prioritise your debts - use the list you made earlier to put the highest interest amounts at the top. These are costing you more money than you have to spare, so they're going to be your target to pay off first
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See if there are any areas in which you can maximise your income. Is there any overtime available at work? Could you squeeze in a part-time job at a local supermarket, or do you have a friend who runs their own business? Don't forget, when you're at work you have no, if any, chance of spending any money so it's all gain.
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Rent out a spare room, or consider moving in with a friend or relative. Cutting down costs will give you more money to put towards your debts.
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Total your living expenses and minimum payments and add the two together. Hopefully this figure is less than your salary and other income? If it is, then read on further down this page.
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You may be able to save money without depriving yourself of something you enjoy. Check you're getting the best deal on your home energy. Click here for details on how to check.
Seeing this on paper should hopefully help you realise that it is possible to get out of the situation.
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Make all of your minimum monthly payments on time to keep creditors off your back. If you give them what they ask for, they have no reason to start hassling you for more at this stage.
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Get rid of any 'insurances' you may have on your credit cards. Payment protection is where banks make so much of their money. For every £x you owe, the bank charge you a certain amount to cover you for any missed payments due to long-term sickness etc. Whilst it may sound like a good idea, it can be grossly overpriced. In my case, due to the level of debt on one particular credit card, the interest was approx £50 per month and the payment protection was £27. Every month, the bank added on £77 to my balance for this. At the same time, the bank sent me statements asking for a minimum payment of £64. So each month I paid the £64 not realising that in fact for every £64 I sent them, I still ended up owing the bank an extra £13 on top of my balance from the month before! It wasn't long before they started applying £20 over-limit charges because I hadn't realised by balance was still going up despite making the minimum balance payment.
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The week you're due to get paid/receive benefits check out your bank statement and see how much cash you're going to have left over.
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Use this 'spare' cash to make an extra payment towards your debt with the highest interest rate. The less you owe them, the less they'll charge you in interest. The interest you save is then extra money to pay even more of your debt off the month after! Don't be tempted to pay off a smaller, lower-interest debt with this money, just pay off towards the higher-interest one.
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Continue doing this each month until your highest-interest debt is completely paid off. The day you get that statement with the £0.00 balance on it, you'll be elated. It's a big achievement - stick the statement on the back of the bathroom door so you can see it each morning, reminding you that it is possible to pay debt off.
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Now your highest-interest debt if paid off, start targeting the debt with the next highest rate of interest, etc and follow the same process.
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Using this method you will slowly but surely, one-by-one, eliminate your debts and reduce the number of creditors you need to keep happy each month.
- This can be a slow method, but you do get there in the end. After a couple of months, you may find that you're in a position to consider trying to consolidate your debts into one easy monthly payment. There are several options available to do this. For smaller amounts - typically under £5,000 - considering trying to open a new credit card account to transfer the balance at 0% introductory for 6 months, for example. Make sure you close the original card account, and use the interest savings to pay extra off your card balance each month. For details of some card issuers who offer 0% balance transfers, visit our Credit Card pages. For larger amounts, perhaps a low-rate personal loan would suit you. Having your debt all 'under one roof' makes it a lot easier to track your debt situation. You can throw all your spare cash at this one item, and really hammer the balance down. For details of some low-rate loan offers, visit our Personal Loans pages. We have details for both secured and unsecured personal loans.
Whilst no-one has ever said that repaying debt is an easy thing, it is possible. Hopefully you will have found some of the tips and advice on this page helpful in some way. I've been there myself and learned the hard way - in most cases how not to do it - but we all have our own individual circumstances and situations do vary and not every method will work for everyone.
Best of luck repaying those debts.
Steven
InsuranceChecker.co.uk Webmaster
