Being in large amounts of debt is not always a bad thing, particularly if you feel you will easily be able to repay it in the future, but the truth is most people get into problematic debt because they haven’t thought about it carefully enough. With credit being readily available, even after the credit crunch, it’s not that hard to find yourself in a tricky financial position – particularly if you lose your job. However, almost all debt is solvable, and there are a variety of techniques that can help you get out of your debts sooner rather than later. If you’re looking to cut down your debts, then these four tips can point you in the right direction.
Taking your head out of the sand
The real battle against debt comes from your determination to deal with it. Look across all of your outstanding accounts and tally it up, then come up with a plan to reduce your debt through repayments. If you are in a relationship or marriage with joint accounts or a mortgage, then it’s vital that you reveal the full extent of your debt to each other honestly – it will probably cause a lot less stress in the long run.
Cash your savings
If you’re in £1000 or more of debt that you want to get rid of, then it’s rarely a good idea to have savings at the same time as outstanding credit. For instance, at the moment a cash savings account will only be paying you around 3% AER, while a personal loan would be closer to 10% and a credit card 18% – it just doesn’t make sense in the long term! Use your cash savings to wipe out as much of the debt as you can, then start saving again as soon as you can.
Consolidating
Having multiple outstanding accounts will more than likely cause you stress as you try and keep up with all the repayments at differing rates. Instead of doing this on a monthly basis, you should consider simplifying the process through consolidating. If, for instance, you had £2000 outstanding on four different accounts, all averaging 15%, then it would be much better to take out a new £8000 loan at 10%, pay off all the other outstanding balances and then just repay that loan. It will solve the headache of having multiple accounts and save you money. Try Santander for good rates on loans.
Cutting back on luxuries
Do you really need to pay for a coffee in the morning? Could you get to work using a cheaper method than you’re currently using? Do you always reach for the phone at mealtimes? Just cutting back on a few everyday habits could see you rack up some serious savings over the course of a year. Ditching the coffee could save you £50 a month, while making your own meals could save you well over £500 every year. Combining cutbacks will only see you climb out of debt quicker.