THE credit crunch, interest-rate rises, loss of earnings, the reasons are numerous but for many people they are beginning to add up to one thing; more debt and fewer ways to pay for it.
Particularly around Christmas time many people are asking themselves how they are going to manage not just their existing debts but also ones they may incur over the next few weeks.
The most important thing to do is to recognise that there is a problem. Whilst the final demand notices from credit card companies and utility firms are sure signs that your finances are not going as well as they might, there are other, more subtle indications.
- Are you using your overdraft regularly?
- Do your only pay the minimum off your credit card?
- Do bills get left unopened?
Any or all of these should be seen as warning signs that you're slipping into debt and that action needs to be taken.
If alarms bells are ringing now, no matter how quietly, it's time to act. Having recognised the symptoms, what are the solutions?
Firstly, don't panic. If there are debts coming at you from all directions, don't immediately pay them all off by taking out another loan. Seek independent debt counselling advice first of all.
It may well be that one single loan is the answer, but for many people another source of credit is the last thing they need.
The Citizens Advice Bureau, www.citizensadvice.org.uk, is a good place to start.
Here you can get advice along with tools and guidance to enable you to sort your problems out. There is a bureau in Cambridge, at 72 Newmarket Road.
For those who feel more comfortable dealing with their problems over the phone or via the Internet, try the National Debtline, www.nationaldebtline.co.uk , or on 0808 808 4000 or the Consumer Credit Counselling Service website at www.cccs.co.uk
Another reason for not taking out a loan, apart from the temptation it brings, is that with budgeting it may not be necessary. Take a long hard look at your monthly spend.
You may well be amazed at where all that money ends up.
A coffee on the way into the office? £50 per month. Buying sandwiches every day? £80 per month. Even allowing for holidays that's still over £1500 of extra spending that could be cut if lunch was made at home and the coffee scrapped.
If you're serious about getting out of debt, many of these will have to go. If the debt has gone past the 'cutting out luxuries' stage, speak to the lender.
All lenders would rather know there's a problem in advance then suddenly be faced with a defaulting payer and most of them will agree a monthly repayment scheme that enables them to get their money back and you to stay solvent.
It's in no one's interest for you to go bankrupt and most credit card companies will help.
For those with more drastic money problems, and particularly those owing money to several lenders, a Debt Management Plan (DMP) might be the way forward.
This can be set up for free by one of the support services mentioned earlier and enables those in debt to manage all their liabilities.
Although it will be flagged up on your credit record, it's much less of a problem than the next step on the road salvation, the Individual Voluntary Arrangement (IVA).
An IVA is a last resort for those in debt as it sits on your credit record for six years and should only be used when all avenues of debt counselling have been exhausted.
The experts say you should always have between three and six months salary in a savings account for rainy days.
Particularly with Christmas coming up, now is a good time to be looking at your outgoings, making sure you can cover everything and making savings where you can't.
TOP TIPS AND FACTS
- With interest rates on the rise, debt is becoming more expensive to manage
- There are many telltale signs that you may have a debt problem, don't ignore them
- Don't automatically take out a consolidating loan to pay off your other debts; there may be a better solution
- Always seek free, professional financial counselling. There are a number of places you can go for this
- Write a proper monthly budget and cut back on some luxuries.
You'll be amazed how much you can save
- Talk to lenders; many will be sympathetic and agree to a new repayment plan
- If you have several large debts, consider a Debt Management Plan
- An Individual Voluntary Agreement should only be used where every other method has failed.
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