What to do if you're in debt
With unemployment rising and incomes falling, for many people managing outstanding borrowings on mortgages, credit and store cards and loans, is becoming increasingly difficult.
If you are beginning to struggle each month to re-pay what you owe and indeed are borrowing more to meet day to day expenses, the first essential thing to remember is not to panic. By taking a few simple steps you can help yourself. But don`t borrow any more money. That will not help.
It is also important that you don`t ignore the problem or any letters you might get from those you owe money. Indeed it is far better if you get in contact with your bank, your credit card company and any one else you owe money to and tell them you are having difficulties but are taking steps to sort it out. You may even get them to freeze interest and repayments for a bit to help you get back on your feet. Remember it is not in their interests if you don`t pay the money back.
Identify all the money you owe. It is important that you make arrangements to pay off priority debts such as your mortgage or rent arrears and fuel arrears to ensure you keep a roof over your head and the heating and lightning on. Prioritise too debts which can be enforced through fines or prison sentences such as court fines, council tax arrears and maintenance payments.
With all other debts such as overdrafts, loans and credit cards, always try to pay off if you can the most expensive first. This will help stop the amount of money you owe growing faster than you can re-pay if the lender will not freeze the debt.
Having identified what you owe, work out a realistic budget so you have enough money to live on without having to borrow any more. Identify where you can make savings and cut out the non essentials though an occasional small treat is allowed but only if and when you have proved to yourself you can stick to your budget. Any money left over each week is the amount you have to pay towards paying off your loans in order of priority. And don`t forget to check if you could do anything to get more money. Could you work overtime, for example? A part time job? Are you claiming all your benefits and allowances? Can you rent out a room?
Having worked out how much you can afford to repay each week or month, approach your lenders and make offers of repayment to each based on your budget. You must treat each lender equally and fairly. Many lenders will be sympathetic if you can demonstrate that you are making every effort to pay off what you owe.
You might also like to consider debt consolidation. This is especially helpful if you own your home and your mortgage is significantly less than the value of the property. By lumping all your expensive debt into one loan secured against your home this might work out cheaper and with the new loan you can repay all your expensive loans. But you could lose your home if you don`t keep up repayments so only consider this if you can afford the repayments, have stable finances and your costs are under control.
And remember you don`t have to struggle on alone with mounting debt and with resources available online at sites like www.debtwatchdog.com/Debt-Management you can always be assured of the best possible help.
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