Most people who end up in debt don’t see it coming, but to suddenly realize that their financial situation is spiraling out of control can create a huge range of problems for an individual and their family. Sadly, getting into debt is a common problem. According to a survey conducted by the Money Advice Service (MAS), nearly nine million people across the UK are in serious debt. Worse still, the Citizens’ Advice Bureau claims that young people aged between 17 and 24 account for 15% of debt cases.
We all need to borrow money at some point in our lives, whether to take out a mortgage to buy property, make a large purchase such as a new car or use homeowner loans to finance home improvements. How we manage a loan and make the repayments can often be a major factor in determining whether we end up in serious debt or not, so making wise financial decisions from the start is crucial.
Anyone who takes out a loan needs to ensure that they have the means to pay it back. If a person’s financial situation changes, however, such as following redundancy or divorce, it can have dire consequences. It is always important to speak to the loan provider to work out a plan of action to manage repayments. Many people often make unwise decisions at this stage, which can get them into further money troubles. Taking out a loan, for instance, to pay debt off is an option for many, but choosing a high-interest loan can cause debt to spiral out of control, resulting in a vicious circle of further borrowing. Choosing the least expensive loan or a credit card with a low APR, as opposed to costly payday loans, is a much wiser option to help deal with debt issues.
For anyone concerned about being in debt, it is important to face up to reality. Sadly, ignoring threatening calls or letters from debt collectors will not make problems disappear. It is important not to bottle things up, so speak to trusted family members or friends and seek impartial financial advice. Often this is a first step to tackling the issue and seeing a clearer picture. It may even be that a family member or friend will offer to help you financially.
According to the Guardian, it is vital to work out how much you owe and which are the top-priority debts. These are usually those that put your home at risk. Credit cards, overdrafts, hire-purchase agreements and loans from relatives should have a lower priority. It’s important to then work out your income and expenditure so that you can set a realistic budget for each month.
Speak to your mortgage provider if you are struggling to make payments. They may be able to come up with a solution that can help you. If you rent, contact your landlord as soon as possible, and remember that you may be entitled to financial help, so check out if you are eligible for any state benefits.
Devising a debt management plan can put you in control of your finances and reduce your risk of falling further into the debt trap. If you have a number of outstanding loans, then you might consider taking out a debt consolidation loan. Debt consolidation loans are essentially a way to repay all debts so you make one payment per month rather than smaller individual repayments. This can help to make it easier for you to budget each month. If the new rate of interest is lower than that for your original debt, the overall amount you have to pay back could be reduced. If you do decide to go down this route, do be cautious and ensure it will not leave you worse off in the long term. Avoid taking on a loan with a higher interest rate, as it will only increase the amount you have to pay back. Debt consolidation loans secured against your property can offer lower rates of interest, but ensure that you have the means to make repayments so that you do not risk repossession.
There is lots of advice available for people who are concerned about being in debt, so it is worth speaking to experts who can help. Making wise choices with regard to repaying debt can also help to get you back on the straight and narrow so that you can live a debt-free existence again.