It can be quite a scary time when you realize that you’re in debt to a level that you are not able to manage.
This could mean an increase in mortgage payments for some, for others it could be repaying student debts, debt consolidation loans and for other it is shopping habits that have got out of control.
No matter what the cause is there are several things that you can look into so that you can get on top of the problem.
The first thing that you should do is not to panic or bury your head in the sand.
Here are some practical steps that you can take to get back on track.
Understand your Budget
The first thing that you should do is taking a look at your monthly budget. Take a look at how the money coming in compares to the money going out.
You need to be realistic in terms of what you spend and should look at your bank statements.
Write down everything that you spend and see what you can cut down on or cut out. You will still want to have a lifestyle, but whilst you are battling with debt you may have to make sacrifices for a period of time.
One thing is a definite; you will have to change your spending behavior.
Get Some Advice
Once you have done this you should consider getting in touch with a debt advisor to discuss your position.
You are able to get free debt advice and discuss the options that are available.
Prioritise Your Debt
There are some bills that should be considered a priority because if you don’t pay these bills you could risk your home or lose access to basic utilities.
These bills include rent/mortgage, council tax and utility bills. If you are having trouble in paying these then you should call the creditors to explain.
A good debt advisor will help you to prepare for these calls.
Once you have tackled the priority bills, you can turn to non-priority debts.
These are still important and these debts include credit card debts, bank loans and overdrafts.
You should first target the most expensive of these, which will be the one with the highest interest rate.
Work your way down the list from the most expensive to the less expensive.
Keep in mind that a missed payment will affect your credit rating.
If you have many non-priority debts then you could consider a debt consolidation loan, which will transfer all of your debts into one debt that will have one monthly payment.