With 40% of us using credit cards to buy food and many of us using credit to pay for other living expenses, it’s never been more important to get on top of your debts. There are several things you can do to reduce your debts and regain some control over your finances.
Know What You Owe
In order to improve your financial situation you must establish how much you owe and who you owe it to. Make a list of creditors, monthly payments, interest rates and total debt and then compare this against your income and household expenses to establish how much you can afford to pay each month.
Knowing who you owe is especially important if you are considering applying for a consolidation loan as you are unlikely to be approved by a company you already have credit with.
Consolidating all of your existing debt into one loan is not always cheaper, but does give the advantage of having just one monthly payment to manage. It also means that you will have a single fixed end date, which can help with motivation when debt is getting you down.
For some debts, such as credit cards, only being able to pay the minimum can mean you are paying the debt back for several years and during this time most of your payments will simply be servicing the interest charges. In these circumstances, a consolidation loan may enable you to get out of debt faster and save on interest payments.
Use a comparison service to check you are getting the best deals on utilities, banking services, insurance products and your mortgage. Moving to a cheaper energy tariff or switching to a current account that doesn’t charge an overdraft fee could help to free up some money for paying off your debts.
Many providers will also offer rewards for switching, such as a reduced rate for a fixed period of time or cash back. These small incentives add up and getting on top of your finances means taking advantage of every offer you can.
If you are struggling to meet your monthly commitments do seek help from an experienced debt adviser. Organisations such as Citizens Advice and Consumer Credit Counselling Services offer free and confidential advice and support.
Trained advisers will help you work through your finances and create a household budget. They can also give advice on the types of debt-management solutions that would suit your circumstances.
If you have high-interest credit-card debts it would be beneficial to transfer the balance to a new card that offers 0% interest for a set period of time. MoneySupermarket offer balance transfer comparison tables, which will allow you to compare the length of the deal and any transfer fees.
Using 0% balance-transfer cards will mean that any money you pay toward that debt during the set period will reduce the balance and enable you to pay it off quicker. Try to clear the card during the 0% period, but if you can’t try to move the remaining balance to another 0% card before you start incurring interest again.
Article submitted by Andrew at Money Supermarket