Borrowing Tips - Dealing with Debt
Do something now!
If you find yourself in debt the first thing to do is face up to it, you can't avoid it forever and the longer you leave it, the worse it will get. You can take a number of steps to sort it out:
• You must work out a budget (there's one in the centre section of this directory) and calculate your income and outgoings. You can then see what payments you can afford.
• Talk to the companies you owe money to and explain your situation.
• Discuss whether you pay an amount you can afford each week/month.
• Stop spending on any credit cards and store cards. Also see if you can transfer your outstanding balance to a 0% or low rate card to reduce your monthly payments.
• Look at ways to increase your income such as working more hours, getting a weekend job or even renting out a room in your home.
Whatever you do, don't ignore your problem.
Remortgaging and Secured Loans
There are various options to consider and remortgaging your home is just one of them. The low interest environment the UK has enjoyed in recent years has meant the equity in your home can be used to consolidate other debts by remortgaging. According to the Council of Mortgage Lenders the level of remortgaging has risen sixfold in recent years. A remortgage will often reduce your overall monthly debt payments but remember you are likely to be paying over a longer period. Also you need to remember that if you cannot keep up repayments on a mortgage or other debt secured against your property you risk having your home repossessed.
In the future
There are a number of steps you can take to stay clear of debt problems in future:
• Staying in control of your finances - keep track of your spending and always check your bank statement
• Budget for irregular bills and expenses and use direct debits which may give you small discounts
• Educate your family about managing money to stop anyone else suffering the same hardship and start saving money in an account or financial plan wherever you can
• Seek help immediately if debts start to build up
• Budget properly as it gives an accurate picture of your financial position. It will help show you where you need to change your spending habits and, possibly, where savings can be made.
• Evaluate your standard of living, many have found out to their cost there are no longer many guaranteed jobs for life so you need to think about what you would do if your circumstances changed dramatically. This is where savings are important.
• Think carefully about your purchases - ask yourself whether it is something you really need or whether it is something you just want...
The opinions expressed are those of the author only. The material is for general information only and does not constitute legal, financial or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation by an FSA authorised company where the market is FSA regulated.
Your home is at risk if you do not keep up repayments on a mortgage or other load secured on it.