It’s easy to panic when you’re in debt but making the wrong choices could add to the amount you owe, and mean it takes longer to get out of the red.
Add more debt
You can’t spend your way out of debt and ignoring the situation and taking on more credit will just make the whole thing worse. Ask yourself if you really need extra credit and if you can afford more repayments?
Concentrate on paying off what you owe before taking out new cards or loans so you can clear up your debts, boost your credit rating and ultimately regain your financial independence.
Instead of relying on cards, try taking out a set amount of cash each week or consider prepaid credit cards, but watch out for the monthly fees.
Making large purchases
From seasonal sales to price reductions or special discounts, there are plenty of ways retailers will try to get you to part with your money.
Cut-price deals on big-money items like furniture, cars or even a long holiday may be tempting but they will hit your ability to clear your current debts. Ask yourself if you really need an item and if you can actually afford it.
It may be better to wait until your debts are cleared, and the price may have even reduced by then.
Stop paying debtors
Debtors don’t like being ignored. Missing payments or just hoping the debt will disappear could result in extra interest charges and will damage your credit rating. You could also end up with bailiffs knocking on the door seeking to take away your possessions as compensation for what is owed.
It is worth talking to your bank or credit card provider as they may be supportive and help set up a suitable repayment plan if you are struggling to keep up. You could also seek guidance from Citizens’ Advice.
Spend free money paying off debt
Keep track of your spending so that all your money isn’t just going on paying back the debt. Your debt repayments will be one of your many bills and you still need to buy food and clothes and keep money aside for emergencies. Even if you suddenly find you have enough money to pay off a debt early, consider if you may need the money for other essential daily essentials and whether you would be better off sticking to the payment plan.
Wait for a windfall in the future
Don’t bank on a future inheritance or pay rise helping to pay off your debts. Neither are guaranteed and both may also result in extra tax charges, leaving you with even less money. Also by the time that inheritance or pay rise comes, the interest on your debt may well have rocketed.
It is easy to think that everyone gets into debt. But it is possible to live without it or even just manage it better.
Our tips should help you stay wise about your debt by communicating with the debtors, keeping in control and not adding extra if you can’t afford it.