Britain is a nation of debtors. The average debt amount per household in the UK now is over £30,000, compared to an average £17,000 ten years ago. In recent years, loans have been more easily accessible and yet, with the cost of living rising, the repayments are harder to meet.
Although lenders are now cracking down on the amount of loans they approve, for some people the damage has already been done. They are into the red with their repayments and have a steady flow of creditors calling or sending nasty letters.
If you find yourself bogged down with overheads, there are steps you can take. A little debt management never hurt anybody, and could save you a tidy sum in the long run. Obtaining your credit file can be an invaluable step in the process of managing your finances. Examine each entry and make sure you know where each of the debts has come from. Doing this will highlight any unfamiliar debts which may indicate you are a victim of ID fraud.
Once you're satisfied your credit file is accurate, make a note of how much you owe to each creditor. Contact each one to ask for a settlement amount, and total them all up. If you can't afford the settlement amount, ask if there is a chance of overhauling the loan and starting from scratch. If you're honest with your creditors from the start about your difficulties, they'll be more likely to help you.
If you manage to get reasonable settlement amounts, get quotes for consolidation loans to that amount. Depending on your credit rating, you may not be eligible, but some debt consolidation companies offer these specifically to people with bad credit. Do your maths when comparing consolidation loans. Don't just go by the monthly payment, take notice of how much you'll actually be paying back once interest is added. If this is substantially higher than your actual debt amount, it may not be worth it.
For example; a £5000 debt consolidation loan taken out o ver 5 years with an APR of 12.6% will end with you paying £6764 .65 in total. If your debts are only £5000 to begin with, that's nearly £2000 more you'll be paying. Get the best APR you can and do your homework, instead of accepting the first loan offered to you.
But debt management needn't involve taking out more debt. Try contacting all your creditors as mentioned above, and if you can afford it, put a percentage of your income into a high-interest savings account each month by standing order. This accumulated interest will help towards your debt repayments. It's also worth asking your creditors if you can take a payment holiday while you save up some funds. Depending on your past behaviour some lenders may grant you this, if you explain why you want it.
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