I owed ??60k on four loans and 11 cards, but paid it all off and am now debt-free. Here's how you can sort your debt problems.
An easy to follow plan could help many relieve the burden of debt and high interest payments.
Britain has become a country of debt addicts, with many people relying on credit just to make ends meet. According to the latest figures from the Bank of England, we owed over ??1,000 billion to mortgage companies. Thus, thanks to increasing house prices, mortgage debt has grown by ??450 billion in the past 5 years.
Over the same period of time, unsecured credit (personal loans, credit cards, store cards overdrafts etc) has grown from ??132 billion to ??192 billion. This means that unsecured debt has increased by ??1 billion a month since May 2001, and now amounts to almost ??8,000 per house!
Personal debt is at an all-time high and it is no surprise that millions of borrowers are struggling to keep up with their monthly repayments. I know exactly how they feel, because I was in the same situation, when I found myself owing almost ??60,000, thanks to four personal loans (including a debt consolidation loan !) and eleven credit cards, most of which were maxed out!
Here are a couple of tips to handle debts:
Tip 1 - Budgeting
The first aspect you must tackle is your household budget. Househould financial mismanagement is very often the main cause of debt problems.
The first thing that you should do is list all of your priority expenses. These are the essential bills which you must pay every month. These include:
? Rent or mortgage (you need to keep a roof over your head) ? Council Tax (non-payment could lead to imprisonment) ? Utilities (gas, electric, telephone and water) ? Food (you need to eat!) ? TV Licence ? Hire purchase (for example, car payments) ? Child Support ? Secured Loans (your home could be at risk for non payment) ? Travel costs ? Clothing ? Fines, ccjs etc
Once all of these costs have been met you will be left with your disposable income. This is the amount you have to pay your creditors. If you don??t have enough to pay your creditors this is a warning sign that things are getting out of hand.
Tip - 2: Prioritise debts
Almost everyone underestimates just how much money they owe. Your need to stop ignoring the problem hoping it will somehow magically disappear. Get all of your statements etc together and make a list of all the debts.
Don't list the debts in order of the amount owed. What you need to do is list them from the highest interest rate to the lowest, because it's better to pay off your most expensive debts first. Store cards are usually the highest, because most charge rates of at least 26% APR. At this point you should destroy your credit and store cards. With better budgeting you should no longer have to rely on them and doing so will only increase your level of debt.
After you have listed your income and expenditure, make an honest assessment of your situation. If you don??t have enough to pay the creditors or don't know where to begin, get professional help from a debt consolidation service, such as Chase Saunders. They will draw up a debt-management plan for you and will negotiate with your creditors on your behalf.
If you have a surplus of cash after all of your payments then you have several options:
? You could make the minimum monthly payments on your debts while allocating all of your spare cash at your most expensive debt (the highest interest) until it's gone. Then tackle the next most expensive debt and so on, until all of the debts are paid in full. This is known as 'snowballing', because the rate at which you repay your debts snowballs as your debts reduce.
? If you have any savings, use as much as you can spare to pay off your most expensive debts. After all, there's no point earning after-tax savings interest of 4% a year when you're paying 30% on your store card!
? In order reduce your interest bill and save time, you could consolidate your existing debts with a low-rate debt consolidation loan (or transfer to a 0% card ?C but read the terms and conditions carefully because one late payment could void the low rate). However, you should only consider this if you are certain you wont be tempted to use your cards again! Many people who take out consolidation loans go on to build up more debts again.
If none of these options are open to you it may be worthwile considering a more formal approach such as an Individual Voluntary Arrangement (IVA). This is legally binding contract that can have up to 75% of your debts written off and is a viable alternative to bankruptcy.
Author: mccannio
Author Bio:
Paul McCann is a professional debt consultant who specializes in Individual Voluntary Arrangements - IVAs . For more information then visit debt consolidation
