Debt is a major problem in the UK, with many people finding themselves in it after paying only the mortgage. Four in every ten people use credit cards for grocery purchases and more than 12 million people amass credit card debt for daily living expenses to get through the end of some months. High inflation levels and reductions in salaries have left many households facing financial shortfalls. With winter just around the corner, energy bills will make things worse for many consumers.
When people find themselves in debt, they may take desperate measures. A study by Shelter revealed that more than one million people used expensive payday loans to cover their rent or mortgage payments in 2011. The charity believes that six million more used other forms of credit such as credit cards, other loans, and unauthorized overdrafts to help cover housing expenses. Getting finances back on solid ground requires some work but the steps are easy enough for anyone to follow.
Become Debt Savvy…Get To Know Your Debt Situation Intimately
Before you can repay debts, you must know how much you owe. Add up debt and calculate how much interest is being paid. List the creditor next to each debt, noting the actual operator for a white labeled card marketed by a third party. You will probably not be eligible to take out a loan or credit card with an existing creditor. Avoid applying for additional credit with this company because it may result in a rejection footprint on the credit record.
After summing debt, calculate how much you can afford to repay each month. If debts are limited to a small number of interest-bearing credit cards, transferring the balances to a zero interest card may be the least expensive option. Shopping around to find the lowest balance transfer fee and longest interest-free period will keep costs low. Barclaycard, Halifax, and Virgin often have appealing zero interest offers.
Don’t Bite Off More Than You Can Chew
If total debt is too large to consolidate on a single credit card, transfer as much as possible to the card and make minimum payments while focusing on repaying debt that could not be transferred. An alternative approach is to take out a loan to cover the entire debt. Though this approach may be more expensive, repayments will be fixed and you will know in advance when the debt is scheduled to be repaid in full.
Getting other finances in order can make debt repayment much easier. If the current account is in overdraft, see if the overdraft can be transferred to a new account with more favorable terms. To save money on utilities, shop for an attractive current deal that will replace a standard tariff or take over when a fixed deal ends. Remortgaging may result in big interest rate savings on the home mortgage.
When debt seems uncontrollable, get free advice from organizations like the Consumer Credit Counselling Service, National Debtline, or Citizens Advice Bureau. Their debt advisors can help establish an affordable household budget and will explain the various debt repayment options.
Taking these steps to begin repaying debt immediately should improve your financial situation.