No matter how much debt you have, you need to manage it properly. Even small amounts need to be handled sensibly so they don’t spiral out of control and you improve your credit rating by paying them off promptly. For larger debts, then it may be an idea to speak to a debt management counsellor so that you can formulate a workable plan that pays down the amount you owe without making daily life difficult.
Whatever you owe, here are some great tips for resolving your debt problems.
Know how much you owe and to whom
You need to create a spreadsheet or list of all your debts, including details of the creditors, the amounts, how much you pay each month and on which dates. Having this information at hand means you can see the entire situation and see the numbers reducing.
Keep the list up-to-date. It’s encouraging to see the amounts reduce month by month and, periodically, to see some debts dropping off the list as they’re paid. Update once a month after you’ve made all the payments for that month.
Pay the amounts on time
This seems like a no-brainer, but so many people either forget or hold the payment back so they can pay for something else (which may not even be an essential). Late payments often incur fees, so don’t be late unless you really can’t avoid it, in which case you need to call the creditor to explain and ask for the fee to be waived.
Use your smartphone to send alerts a few days in advance of each payment’s due date so you have lots of notice to either make the payment or speak to the creditor if there’s a problem. If you miss a payment, don’t plan to pay double the next month as you will incur interest as well as a late fee and the default may be reported to the credit agencies.
See your minimum payments as just that
You need to make the minimum payments to stop your debt growing any further, but this won’t help you to make any serious progress. Of course, if you know it’s all you can afford most months, then make the minimum payment, but if you can afford a bit more some months, pay a bit more.
Prioritise your debts
Credit card debt is often the first priority because it usually has the highest interest rates, so once these debts are reduced or settled, you’ll have more money free to concentrate on your other, less expensive debts.
Keep your other bills in good order
You aren’t expected to pay more than you can afford on your debts, which means you should have enough to meet your other bills. You have this leeway, so don’t be tempted to miss accounts and bills that aren’t in arrears to pay down the ones that are. All you’ll do is worsen your credit rating and incur more late charges.
Create and maintain an emergency fund
If you have a small stash of savings – £1,000 or less – then keep this back to cover emergency expenses. Sure, it’d be great to spend it on clearing some or all of a debt, but if you can’t pay for unexpected car repairs then you might have difficulty getting to work or have to rely on expensive public transport.