The Do’s and Don’ts of Managing Debt

Knowing how to tackle your debts can be challenging. There are many options and weighing up their various advantages and disadvantages can be confusing to say the least. On top of this, there is a lot of contradicting information out there from different sources.  

Considering the average total debt per household is £60,363, managing debt is a problem the majority of us are facing – often without clear guidance! We’ve distilled the best tips to give you clear do’s and don’ts which should help you get back in control of your finances.  

Do’s  

Do develop a spending plan  

Often when you find yourself in a lot of debt, it’s unexpected. The way to turn this around is to find out your total amount of debt, your monthly wage, and typical monthly spending. Then enter it all into a budgeting app which gives you limits and notifications when you’re overspending. These are often free and can be linked to your cards. By being more aware of your money, you should make better decisions.  

Do consider a consolidation loan  

Consolidation loans are a great way to simplify debts and reduce the number of creditors you have. Through this loan you borrow the total cost of your debts to pay them all off, then you only have one lender to repay. If you can find lower interest rates with the same length of repayment as your original debts this could save you money.  

Consolidation Express is a well-known broker which could help you find a consolidation loan between £5,000 and £75,000. Your loan should have lower interest rates and not take longer than your original debts to pay off for this to be the right decision.  

Do seek professional help  

If it’s getting difficult to pay back your debts at the end of every month, it could be a good idea to seek professional help. Fortunately, many financial advisors give free initial consultation calls to identify what support could be available. There are a lot of different solutions including debt management plans, individual voluntary arrangements, and debt relief orders. By talking about your situation with a debt specialist, they can help you make the right decision.  

Do prioritise your debts  

The consequences of ignoring some debts are more serious than others. The first debts you should pay off are your priority bills. This includes rent, mortgages, council tax, gas or electricity bills, phone bills, TV license, court fines, overpaid tax credits, hire purchase goods, unpaid income tax, and unpaid child maintenance.  Your non-priority debts might include credit card debts, catalogue debts, unsecured loans, unpaid water bills, overpayment of benefits (except tax credits), and unpaid parking tickets.  

Don’ts  

Don’t miss repayment deadlines  

Late payments will make it harder to pay off your debts as every time you miss a payment you will have to pay a late fee. By setting automatic alerts on your phone reminding you when a payment is due you are less likely to miss these. If you do miss a payment, don’t wait until the next month to pay it off as the sooner you sort it out the less significant the damage to your credit score will be.   

Don’t keep it to yourself  

If you’re suffering with problem debt you might not be able to pay all basic outgoings (such as mortgage, rent, energy bills, and other outgoings) Many people in this situation hide the severity of it from their partners and family. However, this can make things worse and could affect them negatively if they’re making plans for the future without knowing your real circumstances.  

Before telling them, investigate possible debt solutions. This way you can give them an idea of when and how the problem will be resolved.  

Don’t ignore the problem  

Thinking about tackling your debts can be scary. However, by not opening statements or acting on final notices the situation will only get worse and more difficult to manage. No matter how hard you think the debt is to tackle, no debt problem is unsolvable. 

Don’t be intimidated by creditors  

This is easier said than done when you have creditors relentlessly contacting you – sometimes with scary letters and calls. However, there are a few ways you can feel more confident when dealing with them. Make sure you know your rights – for example, ensure they are complying with the Consumer Credit Act. Most creditors also give you ‘breathing space’ of around 30 days if you can show you are trying to sort out your debts.  Find out more about your rights here.