How to manage your debt

Have you slipped into the pattern of putting everything on the plastic and ignored the consequences? You're not alone. Most of us have done this at one time or another. And it's incredibly easy to fall into the debt trap.

2004 and 2005 has seen credit card debt rise exponentially, along with the number of bankruptcies and insolvencies, both individually and commercially.

So, how can you avoid the debt help uk trap in the first place and find your way out if you're already there?

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We all try not to overspend, but, with the cost of living increasing and the pressures of modern life, it's not easy to keep our spending habits in check.

However, you can avoid getting yourself into debt. Or, if you've already spent too much and find yourself in trouble, you can get yourself out of debt. How?

• Tackle the problem before it spirals out of control. Don't ignore your debts.
  
• Prioritise your responsibilities. Your mortgage or rent repayments and utility bills will probably be the most important bills to pay. And, if you have a number of different credit card debts to clear, prioritise based on which have the highest interest rate and pay those first.
  
• Avoid or get rid of your credit cards. It is far too easy to put it on the plastic when you're trying to avoid overspending.
  
• Seek out a credit card with a low interest rate if you feel you must have one.
  
• Shop around for a good deal. The Bank Of England base rate is 4.5%. Many credit cards offer good rates just a little higher than the base rate. Yet many consumers pay as much as 20%. Even some well-known big-name brands are charging these higher rates.
  
• Switch to a better rate. If you choose a credit car offering 0% interest, remember the rate is set for a limited period only, so you'll need to change cards before that rises.
  
• Avoid store cards unless you can clear the balance within the interest-free period, as their rates are much higher than regular cards.

What about consolidation?
Debt consolidation is a quick fix solution but can means that you may much more than your debts back. Taking out one single loan to cover all your existing repayments and have someone else deal with your creditors may seem like a very appealing option.

However, the interest rates charged on these loans are normally much higher than you can get on the High Street, and they often have unfair payment protection insurance. Furthermore, consolidation loans are “secured” loans, so, should you fall behind on your repayments you will lose your home and/or other assets.

• Shop around. Look for competitive rates on the High Street and get a regular unsecured personal loan if necessary to clear your existing debts. Or look into alternative ways to reduce your debts, such as an Informal Agreement, an IVA, or bankruptcy.

What else do I need to know about managing debts?

1. You should aim to pay off your debts before you start saving. Interest rates on your debts will dwarf those on any savings, so it's worth repaying your debts first. With interest rates at low levels, paying off your debts before building up your savings income is the wisest move.

The majority of companies are more sympathetic than you might think to people who can't afford repayments. This is partially due to the huge cost such companies have to pay to recover debt. Therefore, most will be keen to work out a realistic payment programme that you can afford.

CLICK HERE TO APPLY FOR DEBT HELP