What To Do If You Fall Into Debt
It can be a huge source of stress if you find yourself unable to repay your credit card debt; you may find you are failing to make even minimum repayments and your debt is growing larger and larger. You may find yourself with so much debt that you are uncertain how you will ever be able to repay it. Help is available: there are many ways to clear your credit card debt and many people who can help you to regain control of your finances. Three strategies are advised: financial organisation, reducing your outgoings and increasing your income.
Organisation
The first thing to do when you find yourself in debt is to organise your finances. Make sure that you take all of your financial liabilities into account, not only your credit card debts, and assess all your savings and any sources of income. Each loan, mortgage repayment, overdraft, credit and debit card, as well as savings account and source of income should be considered within your overall debt management plan. Only when you have a clear overview of your financial outgoings and incomings can you assess where your problems lie and what your best options are to solve the problem.
If you have several credit cards, you should aim to pay off the one that is earning the highest interest first. Debt consolidation may be an option to eliminate several outstanding credit card balances in exchange for one, manageable repayment. You should aim to pay off as much of your outstanding debt as possible each month, so that you can avoid extra penalty charges. If you are unable to decide how you can clear your debt, you may wish to contact the Citizens Advice Bureau (listed in your local telephone directory) for assistance.
Reduce Your Outgoings
To eliminate debt you will need to work out a clear repayment plan, and create a strict budget based on your guaranteed monthly income. This budget should take any repayments into account, and assess how you will be able to cover your outgoings without relying on sources of credit and increasing your debts. Make sure that you use your debit card for purchases rather than your credit card, as long as you have sufficient funds in your current account. If you do not have adequate funds you should consider whether you really need to make the purchase. Make sure that you have got the best deal on any purchases you make: you may be able to find cheaper deals for certain items if you buy online.
Contact your credit card provider to explain your personal situation, and request a reduction of the interest rate charged. Some providers may help because they wish to retain your custom. Even small changes can reduce the interest charged on your outstanding debt each month, and therefore more of your repayment will go towards clearing the actual debt. Similarly, inform your credit card company if you notice any unusual fees or charges on your monthly statement: mistakes do happen and you should not be the one to pay.
It can be very difficult to reduce your outgoings, but it is often the only way to afford debt repayments and begin to clear your liabilities. You ought to consider cutting out any unnecessary luxuries, if only for a short period of time, to enable you to make your repayments. Even small changes can have a big impact: taking a packed lunch to work twice a week rather than buying a £5 lunch will save you £10 a week, or £40 a month. This is ten pounds more than the £30 minimum repayment on a £1,500 credit card debt (assuming a 2% minimum repayment), which would enable you to pay off this debt at a much faster rate. You will need to be realistic and accept that your debts will take time to repay, but also accept that changes in your lifestyle will speed up the process.
Increase Your Income
Increasing your income is one of the best ways to clear your debt more quickly, and save yourself hundreds, if not thousands of pounds in interest charges. If it is impossible for you to get a job, or increase the number of hours you work, consider other ways to increase your income. For example, many people do not realise that they may be entitled to one or more state benefits. You might also wish to consider selling items that you do not need or can do without: old clothes, jewellery, films and cds can all be sold on internet market sites or at car boot sales. Increasing your income, even by only a small amount, can help you to clear your debts at a much faster rate.
