What’s the best way to deal with debt?
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What's the best way to deal with debt?
The best way to deal with debt is to work out exactly how much you owe and to whom. Then you can decide if a consoledation loan will be a better option to pay one larger payment each month, meaning you'll pay less interest overall. If this isn't an option, start cutting back on your spending, and pay off what you need to each month to hit your monthly payments. If you can pay more off each month then you should. It will mean you pay less interest in the long run and you'll pay off your debt quicker.
Statistically, most of us will face some sort of debt in our lifetimes. Some debt is more manageable than others, such as a low overdraft or a credit card with a fairly low limit. Other debts, such as payday loans are easy to lose track of and get out of control, leaving us in a panicked state. Struggling with debt can be hard, but it can also be dealt with. We Buy Any House have looked at how you can get in control of your debt.
How do I start organising my debt?
If you’re struggling with any kind of debt, the first step is to work out just how much you owe and how you can manage to pay it back. This can be pretty simple if you have limited debt, but things can add up – if you’re dealing with multiple credit cards, payday loans and an overdraft, it can be overwhelming. Take some time and add up how much you owe to each lender, including the interest. What do you pay each month toward each debt? How does that factor into your income? Make sure that you can afford to pay for everything that you need to with some flexibility. If you’re struggling to make payments, you might need to take a more controlled approach.
What’s the next step to dealing with debt?
Once you’ve got an outline of your debt, you want to add up your essential outgoings. Include your bills, insurance, travel and food – any costs that you can’t really reduce in day to day life. After this, calculate your unnecessary costs – things like meals out, cinema tickets, and online subscriptions. The best way to approach this is to create some sort of spreadsheet so you can easily put all of this data in and see it clearly. You can add in your monthly income and your outgoings, and see what you’re left with. More often than not, when anyone does this sort of outline, they will be surprised at how much you spend each month on non-essentials. This is a good way to start getting your money in order. Cut out a good amount of these non-essentials – but not all of them, as you’re more likely to want to waste money if you completely restrict yourself.
If you can reduce those non-essential outgoings, you’ll have more left each month to work with. At this point, you can start looking at making extra payments to some of your debts to pay them off faster. Most credit card lenders and loan lenders will allow you to make overpayments with no penalty, and overpaying will let you pay them off earlier – reducing your interest and the amount that you owe all together!
How else can I ease my debt?
Tidying your finances is a great start to getting debt under control, but there are other things that you can do to help yourself clear your debt. We’ve had a look at some different options below that you might want to consider:
- Pay off your debt before you start saving money. One of the main disadvantages of your debt that will hover over your shoulders is the interest rates. Paying them off faster will mean that you can save more money long term, especially if your interest rate is quite high.
- Where possible, boost your income. This can be from any potential benefits that you might qualify for that you’re not currently receiving, selling your unused or unwanted items to get some extra money, or developing a side business for additional monthly earning through freelance work. Sites like Etsy and Red Bubble are full of these sorts of companies, which might give you some inspiration!
- Reduce your current outgoings where you can. Changing your utility providers can help this, or moving from certain brands to a cheaper version to save extra money. It’s also worth talking to friends and family about this and making the most of any possible referrals – broadband providers will often run schemes that give discounts for existing members bringing in new members, so you may find that you can make the most of these.
- If you currently have credit card debt with a high-interest rate, you can look at switching to a 0% balance transfer credit card. This should only be done with lots of research and if you’re absolutely sure you’re happy to do it – it can save you money but needs to be done carefully to ensure you don’t find yourself in more debt.
Are payday loans as bad as people say?
Payday loans are often seen as an easy out, as the idea is just to tide you over until your next payday. They are usually relatively small amounts when you are caught short of money, and very easy to get approved for – but the interest rates are astronomical. Often, applicants to these loans are desperate and don’t take into account the interest that they have to pay on these loans – which can be as high as 1,300%. It’s best to avoid payday loans as much as possible because of these interest rates and consider looking at an authorised overdraft for a month if you’re only struggling short term and will be able to pay the money back on your next payday.
Overall, you’re able to take control of your debt, and once you’ve done this, you can look at ways to manage it effectively until you’re no longer in debt. If you find yourself suffering with your debt and are struggling to get in control of it, you can receive free advice from the Money Advice Service. Dealing with debt can be incredibly stressful, but you can find ways to get it more organised and see clearly how you can help yourself get ahead of it.
If you’re struggling with serious debt, such as paying back your mortgage and have decided that selling your house is the best step for you to reconcile, get in touch with us today. As a house-buying company, we can buy your house in as little as seven days, keeping it easy and hassle-free.Back to all articles
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