If you’re in debt you’re not alone.
In fact, as a nation, we in the UK hold over I trillion pounds in
personal debt. Debt can impact your life in many ways, from your
ability to access credit to affording everyday expenses. So if you’re
in debt and struggling to repay, it’s important to tackle the issue
head on. So here is a quick guide to how to deal with debt, and
regain control of your finances.
Prioritize Debts
Pay off most expensive debts first. Bad
credit loans, personal loans and credit cards are the most expensive,
so tackle these first.
Consider a Personal Loan
If you’re in debt and have a poor
credit history, then you’re most likely to qualify only for a bad
credit loan. Although it’s not advisable to borrow more to pay off
existing debts, in certain cases it can make sense if you have very
expensive debts such as store card loans. You can consider
consolidating with a debt consolidation loan, but if you have bad
credit, this can also be an expensive way to borrow
. A better bad
credit loan option may be a guarantor loan. These are available at
lower APR rates than other loans of this type, as a result of the
security offered by a guarantor. A typical rate for a guarantor loan is 50%, and if paid off in time, can also help to
rebuild your credit score. As always, shop around for the best deal,
but if you’re unsure if borrowing more is a good choice for you,
always seek specialist advice first.
Contact your Creditors
When you’re in debt, the very worst
thing you can do is to ignore those you owe. The best way to proceed
is to contact your creditors, explaining your situation and offering
a payment you can afford. Send them a budget sheet which shows how
much spare income you have left, and ask them to freeze the interest
to give you a chance to repay. This shows the creditor you do want to
pay, but simply can’t afford to. If they do not agree to your
offer, they may take further action, but a court will be able to see
you have offered what you can.
Debt Relief Order
If you have debts of under £15,000 you
may be eligible to apply for a Debt Relief Order. These must be
applied for through an approved intermediary such as the Citizens
Advice Bureau, and cost £90. However, bear in mind that although
your debts will be cleared, you will also be financially restricted
for a time. You may find it difficult to get a bank account, and will
not be able to apply for credit for six years afterwards.
Use a Debt Advice Service
Never pay for debt advice. If you are
struggling there are free independent specialist debt advice services
who can help you with a debt management plan to help you get back on
track.
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