Debt is something that nobody wants more so because it echoes poor budgeting. However, you could find yourself in debt due to other reasons like being unemployed, outstanding student loans, or financial redundancy, among others.
Studies done by PA PwC*1 in 2015 suggested that the average household in the United Kingdom will be nearly £10,000 in debts by the end of the following year. The figures had not considered mortgage debt.
In short, debt will be a dreaded reality for many people and can create a situation that has some people in denial and others battling to turn the table around. The best approach is to be calculative, think smart about your financial situation, investigate other options like applying for a loan from a good hard money lender, and learn about how to get out of debt. Below are five expert tips that can prove worthwhile.
1: Acknowledge The Financial Facts
List your debts in order of financial obligations and their consequences. Start with any that affect your home, which can be bills, rent, or council tax. Money owed on hire purchase agreements, credit cards, or overdrafts can go further down the list.
Snowballing can be a viable option if you think you can clear debts with the highest interest rates. It is a strategy that will have you pay the minimum on other debts. The objective is to assess your financial situation to prioritize your debts and determine how to settle them. It is best to remember the consequences of not making any payments irrespective of the interest rates.
2: Work Out A Budget
Drawing a budget to help you clear your debts must be founded on knowing how much you owe. You can consider an online budget planner from Money Advice Services to help you figure out your monthly expenditure and how much is left after settling essential bills and expenses. It will help you determine how much you can set aside for monthly debt repayments.
3: Explore Balance Transfers
Credit card balance transfers can be a viable answer when trying to lower your borrowing. It is worth considering, especially when you have a lower-rate credit card. Transferring the balance to the new card can help you clear your debts faster and avoid extra charges.
If you think you can settle the full amount within a short period, you could opt for a 0% credit card. However, monitor when the offer expires and make sure you shop around for another with similar terms. Switching to a lower-rate credit card is a wise move when you are dealing with debt. The cards charge interest, but their rates are less than what you could be paying on your current credit card.
4: Consider A Personal Loan
The idea of a personal loan to help with your debt situation might sound counter-intuitive. However, it is possible to borrow money to help you manage outstanding debts. For instance, it can be a loan with an APR (annual percentage rate) lesser than your credit card.
Moneyfacts did research that showed the average credit card interest rates in 2016 were as high as 21.6%. If you do your homework, you could find a loan with a half that or lower rate. But experts recommend borrowing to consolidate your debts into one monthly repayment, giving you a more structured approach as you focus on a single debt.
5: Seek Professional Advice
The burdens you carry when in debt can be overwhelming, but you can find help. Consider seeking debt management plan advice or contact an independent organization like Citizens Advice or National Debtline to learn how to manage your debts.
People find it hard to discuss their money problems with their friends, family, strangers. Admitting to being in debt can prove challenging, but it also is the journey to becoming debt-free. However, facing the facts and accepting you are in a financial bind can set you on the right path. Having some professional guidance will also prove vital.