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Dealing with debt can be one of the most stressful and lonely things we ever experience.
Often, it can feel like there is no light at the end of the tunnel. But it helps to remember that you’re not alone.
A recent study by Nationwide, the UK’s largest building society, reveals that around six in 10 of us are struggling with problem debts, with many of us not seeking help.
Burying your head in the sand and hoping the problem will go away is the worst thing you can do.
It’s important to know that if you are behind on your repayments or are being threatened with court action is to seek help immediately.
If your situation hasn’t reached such a critical state, it may help you to start with the Money Advice Service.
There are also some steps all of us – from those with a little to a lot of debt – can follow to help us take charge of our finances and reduce our worries about debt.
First of all, sit down and work out exactly how much money you have going in and out each month, so you can see exactly where you are spending your cash.
Where you can, try to make savings. For example, cancel that unused gym membership and cut down on those vanilla lattes on the way to work and if possible, look for budget options on your weekly shop.
You can use the money you save by doing this to pay down your debts quicker.
Okay, so you’ve trimmed down your outgoings. What next?
Make a list of all of your debts and rank them in order of priority.
Your mortgage/rent should be at the top of the list, along with energy bills, council tax, and any creditors threatening you with court for missed payments. Make sure you pay these first if you can, as keeping a roof over your head and the heating on is vital.
Overdrafts, credit cards, personal loans and store cards come next. It’s still very important you pay these, but also take a look at how you can move this debt around – this could provide you with more time to pay it down.
How do I deal with my problem credit card debt?
Many of us struggle with credit card debt at high rates. So, how do you clear it?
You could try moving your debt to a new credit card with a 0% interest rate. Some providers give you an interest-free period of up to 34 months, allowing you to chip away at the debt without it growing for up to two and half years.
But be aware, there is often a fee for transferring debt from one card to another (see here for some example charges). A fee of 3.5% on a £2,500 balance would come out at or £87.50.
It’s also important to note that if you get rejected for a card, it will damage your credit score, making it more difficult for you to get credit in the future.
If you do get knocked back, concentrate on paying down the cards with the highest rates first. That will stop your debts from rising as quickly.
Talk to your lender
If you’re struggling with a loan or a credit card, speak to the company that gave it to you in the first place.
Sometimes banks are able to lower your interest rate, give you a payment holiday or create a payment plan to get you out of trouble.
Often, people are afraid to ask for this, but remember: they lose money if you can’t pay, so it’s in their interest to help you.
However, there is a caveat: again, depending on the type of agreement made, it could damage your credit score. So, before you press ahead with your lender’s offer, see if there are steps you can take on your own to clear it.
Boost your income
We get in debt when our spending exceeds our income – so why not try to boost your income?
This can be as easy as asking for more hours from your current employer or taking on additional part-time work.
Alternatively, why not try turning your hobby, such as craft-making, into a small business to be run alongside your day job?
The additional money you make from this could be used to pay down your outstanding debts.
However, before you go ahead and set up a company, do your homework. You may have to pay additional tax and there could be permits you need to gain before setting up a business.
Remember, whatever your debt situation, there’s help out there.
Head of advisory services for Open Money, Hayley champions making advice affordable and accessible for everyone.