Your finances may be a cause of concern right now, but it is important to remember that there are no debt problems that are completely unsolvable. Although there is no fast-track solution to resolving your current financial situation, a solid plan of action and a change in personal spending habits should be sufficient enough to put your mind at ease.
Step One - Control Your Spending
Managing your cash effectively, and your debt problems will become easier to control. The most important aspect of regaining financial control is organising a budget. If you can balance the books by reducing unnecessary spending, there will usually be enough money left over to chip away at your debts at the end of each month.
If your annual household income is below the £66,000 threshold, you may be entitled to additional benefits and tax credits. Benefits are available for low-income families, the elderly and individuals who are returning to work.
If you are having trouble paying the mortgage, there are three different Government schemes that can help fill the shortfall. The Mortgage Rescue Scheme, in particular, has proved to be a frequent lifesaver for homeowners.
Look to reclaim money wherever possible. Bank and credit card charges are often made unfairly and you might be able to pull in some unexpected funding for other bills. It is also prudent to reassess your council tax outgoings. Somewhat surprisingly, more than 400,000 UK homes are being overcharged.
Step Two - Cutting Overall Costs
Consider consolidation loans as a means of settling emergency debts and reducing your monthly outgoings. Personal loans are a good alternative for those with strong credit ratings, but those with a less-than-perfect repayment history can consider joining a credit union.
Credit cards can often be transferred to a different provider at a preferential interest rate. In many cases, some lenders will waive interest altogether for a limited time period to secure your business. Don't be afraid to change provider regularly as long as it secures you the lowest repayment levels.
For high credit scorers, a change to a different mortgage provider can reduce outgoings dramatically. A 1% rate drop on a £200,000 mortgage can save a household up to £160 per month.
Step Three - Dealing with Debts
If you can reposition your finances sufficiently, it is important to establish good communication with your lenders. By organising a restructured payment plan, the immediate pressure of debt problems can be relinquished until you are in a stronger financial position.
Consider a Debt Management Plan or an Individual Voluntary Arrangement with a third party company to help get your finances back in shape. Remember to make the right choice between a DMP or an IVA as it can be difficult to reverse an arrangement once a proposal has been accepted.
Jeremy Gold is a freelance author who writes extensively about finance. Find out more about how to get out of debt, and advice on how to manage debt.
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