Forcing yourself to face your debt is extremely difficult – especially if you are having trouble keeping up with your bills. As long as you ignore the problem, however, you will never be able to have peace of mind about your finances. If you are ready to pay off your debt, try putting the following steps into action:
- Find out exactly what you are dealing with.
Before you can deal with your financial issues, you need to know exactly what you are dealing with in terms of the amount of debt that you have and how much you owe each of your creditors. Gather together copies of your bills from all of your creditors. Make a list that includes the name of each creditor, how much you owe them, and what interest rate you are paying each company. Although it may be scary to see these numbers on paper, it is an essential part of figuring out how best to pay off your debt.
- Plan your budget.
The next part of the process is to determine how much you can afford to send each of your creditors on a monthly basis. The best way to do this is by putting together a budget that takes into account all of the money that you are bringing in and all of your ongoing expenses. Any money that is left over after you have covered your basic living expenses can then be applied to your debt. Coming up with an exact figure will make it easier to develop a customized plan for repaying your debt that will allow you to make the fastest headway possible.
As you evaluate your income and expenses, ask yourself whether or not each item on the list is truly a necessity. You may be able to find ways to cut back that can help you get even more money to apply to your debt.
- Consider transferring your balances.
The amount of interest that you are being charged can make a real difference in how quickly you can pay off your debt. If you have a high-interest credit card, you may want to transfer it to a card that has a 0% introductory rate. That way, all of the money that you send in will go toward paying off your debt. Of course, this technique will only work if you are able to pay off the entire amount that you owe during the initial introductory period.
If your debt is too large to pay off that quickly, you can still transfer it to a card that has a lower rate. Even though you will still wind up paying interest, it won’t be nearly as high as it was on your other card.
Of course, if you want to take advantage of this technique, your credit needs to be good enough that you can qualify for a card that has a low interest rate. Consider checking your credit before you begin applying for cards to see how likely you are to get approved.
- Find out if you are paying too much for your overdraft service.
If your overdraft service has a high interest rate, it could be compounding your debt problem. This is another area where you may be able to save by switching to a different provider or a different account. Explore whether or not there are any interest-free overdraft services currently available. Switching to a different account could wind up saving you a lot of money – especially if you have good credit and can qualify for a low rate.
- Think about taking out a personal loan.
Depending on your situation, you may be able to benefit from using a personal loan to pay off your debt.
If you have good credit, you may be able to get a much lower interest rate on a personal loan than you have on your credit cards. You can then use this loan to pay off your cards, slashing the amount of interest that you have to pay in the process.
Personal loans are also a good option if you are taking out a relatively large sum of money. Typically, they are a more cost-effective way to borrow amounts in excess of £7,000. Of course, you should only take out one of these loans if you actually need the money. Additionally, you should never borrow more money than you need. Otherwise, you will only make your debt problem worse.
Before you take out a loan, be sure to compare rates between different lenders. You may be able to get a lower rate simply by choosing a different company to borrow the money from.
- Use the snowball technique to pay off your debt.
One way to make debt repayment easier is by using the snowball technique. In essence, all that you have to do is make the minimum payment to all of your creditors on a monthly basis. Then, choose one creditor to focus on, putting all of your extra money toward that debt.
Once that debt is paid off, you can then apply the money that you have been paying toward it to another debt; again, continuing to make the minimum payments on your other accounts. All that you have to do is repeat this process, continuing to apply the money for each debt that you pay off to another debt until all of your creditors have been paid in full.
- Reach out for help.
If you are still struggling with debt, you may want to get help from a debt relief organization. A payday loan debt consolidation service could be of help here.There are a lot of groups out there that are designed to help people manage their finances. For instance, groups like the Citizens Advice Bureau or National Debtline are both good resources.
You may also want to reach out to your creditors directly to talk to them about whether or not there is a way that you can make your payments more affordable. Once they know your situation, they may be willing to work with you to come up with a better plan.