Author: By Katy Ward

Living in denial will only increase your money woes ? as well as your anxiety.
As soon as you face up to the situation, paying off your debts may be
simpler than you realize.

1. Face facts

Your first step is to discover the extent of your financial problems. Begin by
collating your latest bank statements, tracking down any misplaced pieces of
paperwork and opening those bills you have been ignoring. Next make a list
of how much you owe each company and the rates of interest. Once you have
this information, you can prioritise your debts.

2. Draw up a budget

Next, work out how much you can afford to spend on debt repayment each month.
The Financial Services Authority’s online budget calculator should help with
this by tallying your total income against your expenses and calculating how
much is left over. You can then put this amount towards your debt repayment
every month.

Once you know exactly how much you can afford to allocate to paying off your
debts you will be able to devise a repayment plan to suit you.

This is also a good opportunity to assess your spending habits and see if you
can cut back on luxuries you could really do without. Simple steps such as
taking a packed lunch to work and giving up your morning latte could make a
significant difference to your bank balance.

3. Switch to 0%

If you owe money on expensive credit cards, find out if you can transfer your
debt onto a 0 per cent balance transfer credit card. These clever cards
eliminate interest charges for an introductory period, ensuring that every
penny you repay goes towards beating down your balance. However, to make the
most of this type of deal you must ensure you repay your debt within the
offer period.

Alternatively, if you need longer to repay your debt you may be better off
opting for a long term, low rate credit card. Although you will still pay
some interest each month, it will probably be at a much lower rate.

Be aware that these cards require an almost unblemished credit rating.
Therefore before you apply it is a good idea to obtain a copy of your credit
history from one of the UK?s three main credit referencing agencies ?
Experian, Equifax and Callcredit.

Compare
top deals on 0% credit cards at Independent Compare

4. Explore overdraft options

Paying too much interest on your overdraft can easily exacerbate your debt
problems.

If you think you’re paying over the odds for your overdraft service, find out
if you can switch to a current account with a 0 per cent overdraft. Right
now, the Alliance
& Leicester Premier Current Account is offering an interest free
overdraft of up to £2,000 fixed for 12 months.

What’s more, Alliance and Leicester is also offering £100 cashback bonus when
you switch. However, keep in mind it is likely you will need to undergo a
credit check before you are accepted.

5. Consider a personal loan

There are times when taking out a personal loan can be an effective strategy
for debt management.

If you can get a market leading rate, the APR may well be lower than you are
paying with your current credit card. If you really shop around, it is
possible to get a rate below 8 per cent. This is much more favourable than
the standard 16-17 per cent APR charged by the typical credit card.

It could also make sense to take out a personal loan if you would like to
borrow a large amount of money. As a general rule of thumb, loans for more
than £7,000 are likely to come with lower APRs than those for smaller
amounts. However, be careful not to borrow more money than you need as this
could increase the temptation to get into more debt.

As with any financial product, you should always shop around. You’re unlikely
to get the most competitive rate by approaching your existing lender and
accepting their first offer.

Compare
great deals on loans at Independent Compare

6. Snowball your debts

Rather than tacking all your debts simultaneously, you might want to think
about a debt-busting technique called “snowballing”. This is where you
single out one of your debts and then concentrate all your efforts on paying
this debt off, while making the minimum repayments on everything else.

Then, as soon as you have paid your first debt off, you get to work on the
next debt and continue until you have cleared them all. Psychologically, it
can be rewarding to see your creditors become fewer and fewer.

7. Seek advice

If, despite your best efforts, you cannot see a way out of your financial
predicament, it’s important to get professional advice immediately.
Independent organisations such as the Citizens Advice Bureau (CAB) and
National Debtline offer free guidance for people who are overwhelmed by
their financial problems. The CAB currently deals with 9,300 new debt
problems per day.

If you are struggling to meet your financial commitments, it is also worth
approaching your creditors to explain the situation and suggest a more
feasible repayment plan.

Start saving

Once you feel as though you have gotten on top of your debts, it’s vital to
take steps to ensure you don?t end up in the same position again. Try to set
aside some of your salary each month so you have an emergency fund to fall
back on should something unexpected happen in the future.

Compare
the best Money, Insurance and Energy deals at Independent Compare

Katy Ward writes for BeatThatQuote.com

View full article here