Coping With Debt
Getting into debt problems is a stressful and worrying experience, which has become increasingly common recently as the glut of easily available credit has lead to many people's finances becoming overstretched.
If you find your debts are becoming a problem, it's not the end of the world. There are strategies for coping with your debt - some simple, others more drastic.
Make a Budget
The first step in getting your finances back on track is to make yourself a realistic budget. Make a list of your essential expenses - mortgage / rent, food, electricity bills etc - and how much they cost you each month. Next, make a list of your debts and how much the minimum repayments are each month. Then list your non-essential expenses such as entertainment.
Add up these expenses and subtract the figure from your monthly income. If you're left with a negative figure, you need to cut back on something - ideally, from your non-essential expenses.
If you have some money left after your expenses, you can then use it to repay more of your most expensive debt.
Prioritise Your Repayments
Different debts cost different amounts in interest payments. For example, store cards will usually be more expensive than a personal loan from your bank. Try and concentrate on paying off your most expensive debt first, so reducing the amount of interest you'll pay.
Of course, while doing this, you need to keep up at least minimum repayments on all your debts to avoid getting into arrears which will harm your credit rating and cost your more in charges and penalties.
Credit and Store Cards
Store cards are probably the most expensive form of credit in general use, with APRs in the high 20-30% range not uncommon. Many credit cards also have high APRs, so anything you can do to reduce your debts on them is a good idea. Try to transfer your debt from expensive cards to cheaper ones, or use a promotional balance transfer feature to avoid interest on your debt, so paying it off more quickly.
Click here for more ideas on reducing credit card debt
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