The first step is to take stock of everything. Think of it as a financial M.O.T. By writing down all your debts, large and small, you can get a clearer picture of what you owe - it’s time well spent.
Make sure you have your recent bank statements and credit card bills to hand. As you're making your list of debts, write down the interest rate you're being charged for each and then prioritise with the highest first.
Once you've worked out which debts are costing you the most, you might want to think about transferring any store cards and high-interest credit cards to lower interest credit cards or a personal loan. Just make sure you watch out for any balance transfer fees with credit cards.
Don't put off talking to the people you owe money to - this includes your bank. They will help you, which may seem strange, but it is actually in their interest to do so. Plus, by letting them know as soon as possible that you’re struggling to make your repayments, they may be able to help you manage them better.
Some people like to have some savings even when they’re in debt. Check whether you're actually better off saving first or whether it's better to repay your debts.
To do this, compare the interest rate you're paying on what you owe with what you stand to make on any savings. Remember, you may pay tax on the interest you earn on savings.
One way to approach your debts could be to put them all together in a single personal loan. Not only could doing this make your repayments more manageable by spreading them out over a longer period of time, but it could also help you stay on budget. But, remember, taking out a personal loan could mean it takes longer to pay off your debt and could cost you more in the long run. You’ll also need to be sure you don't rack up any more debt while you’re paying off this loan.
There's nothing like a deadline to help keep you on track. Once you've worked out how much debt you owe, you'll have a good idea of how long it will take you to clear that debt. Set yourself a realistic deadline and commit to paying off what you owe by then.
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