The concept of debt can be daunting and overwhelming especially when you’re struggling to pay back what you owe. However, debt is not meant to cause you stress or anxiety because at some point in life we may need to borrow to pay for a house, car or a one-off expense. It is important that prior to taking on any debt you understand what it entails, such as any interest or charges that could be implemented if you are unable to make your repayments on time. Without this understanding, any debt you enter into might become costly and unmanageable which can lead to your financial wellbeing become impacted.
Stay in control
There are many effective ways to ensure that you are in control of your debt and finances. The most important is being aware of how much you owe, so that you do not forget anything when making your repayments. Knowing how much you owe can help you to understand where you stand and can also allow you to appropriately allocate funds to each debt. Credit reports from credit agencies such as Experian and TransUnion are a great way to see what you have borrowed and paid back, but it is still important to keep your own personal record. It is crucial that you do not take on new debt if you are struggling to pay back what you already owe, as this can affect any progress you may have made towards managing your finances.
Optimise your repayments
Paying off your most expensive debt can often be the best and most beneficial step to take, as this is usually the debt that costs you the most money due to high interest rates. But it is important that you are still able to make at least the minimum payments for the rest of your borrowing, so that you do not incur late fees which will add to your costs and could affect your credit file. The best way to be able to ensure you are covering all your debt is budgeting. Creating a budget shows you how your money is spent each month and what disposable income you have available after you’ve paid for your essentials.
Ask for help
Please remember, if you are finding it difficult to make your repayments you can reach out to organisations such as StepChange and National Debtline. They offer free advice and have resources available to assist you with getting back on track. Setting up a debt management plan allows you to pay off your debts at a rate you can afford. It is an agreement which is set up between you and your creditors where you can pay a reduced amount each month off your balance.
Debt consolidation can be another alternative method of support to help you start paying back what you owe. Debt consolidation involves putting some or all your borrowing together into one new account and it might work out that you end up saving money on interest or monthly payments. However, before you decide to consolidate your debts, it is important to do your research and find out if it is the best thing for your current situation.
Unlike debt consolidation, debt relief orders are often viewed as a last resort solution as it is a form of bankruptcy which freezes your debt for 12 months with a chance of it being written off after this period. However, there are many things to consider before getting a debt relief order and speaking to your creditors can be useful to understand how they can help if you can’t repay your debt.
