How to get out of debt

Monday, November 5, 2007

If you are in debt, here are some hints on how to deal with it :-

Work out exactly how much you owe and who it is owed to. If your debt repayments are more than 20% of your net monthly income you should be looking to reduce them.

Draw up a budget which you can realistically stick to.

You must be disciplined and do not borrow any more money until you have repaid what you owe.

Set money aside each week that you need to live. Give your cash card to a family member so you cannot spend more than you have allocated yourself for the week.

Organise your bills, so everything is paid on direct debit. This will be easier to manage and you sometimes qualify for discounts by paying in this way. This would usually apply to utility companies.

Look at switching utility providers to get a better deal. This way you will be saving money which can go towards reducing your debts.

You could also look to switch to a cheaper credit card or loan provider. You could transfer onto a 0% credit card for a period of time. The rate will rise substantially at the end of the introductory period so you should make a note of when this will occur. Also you are likely to pay a balance transfer fee - so check how much this will be.

Store cards tend to have the highest rates of interest. If you can pay these off first then do so and then cut the cards up.

Look at your current bank account situation. With the rise in the number of Internet banking accounts there is a lot of competition and you may find a lender with more attractive rates on interest and on overdraft rates.

Review your current mortgage. You may be on your lenders standard variable rate and paying more than you need to be. With a wide range of lenders in the mortgage market you should be able to benefit from competitive pricing.

If you need further assistance you should contact the Citizens Advice Bureau to discuss your circumstances. They have numerous experts on hand to advise you on how to handle your debts.