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Are your finances on the brink?
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Step 4: Consider a loan or remortgage
To be more disciplined about paying off your debts, consider taking out a personal loan. There are a number of loans with interest rates just over 6% for borrowers who meet the lending criteria. Try our price comparison tool to seek out the best mortgage deals. It could also make sense to consolidate card and loan debts on to your mortgage because the interest rate is usually much lower.
But remember, the danger of this is that you will be repaying the debt over a much longer period – for the term of the mortgage – so the total interest you will pay back will be higher. Also, don’t be tempted to consolidate card debts onto a mortgage, only to run up yet more consumer debt on your credit cards. Transfer the debt, then bin the cards!
dealing with debt
Step 5: Get debt help
Borrowers with debt concerns should tackle the problem head-on. If you feel your debts are out of control, don’t bury your head in the sand. Seek help from a free, independent advice charity: National Debtline (tel. 0808 808 4000), the Consumer Credit Counselling Service (tel. 0800 138 1111) or your local Citizens Advice Bureau.
Step 6: Prioritise debts
It's important to understand that the creditors who shout the loudest – and put the most pressure on you to pay – may not be your biggest priority. For example, it's much more important to pay the rent, the mortgage, gas and electricity bills than credit and store cards.
Step 7: Negotiate with creditors
Once you know your budget and you have prioritised your debts, you can approach your creditors with a realistic repayment plan which gives each creditor a relative proportion of your monthly disposable income, after you have covered your basic necessities. Most creditors will accept even token payments, provided you are prepared to pay something each month.
