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Managing your debt

No matter how well you plan, circumstances can change. A change in your family situation, the loss of employment, sickness or general overspending are just some of the reasons you could find yourself in a position where debts that were previously manageable have become more difficult to maintain.

That’s especially true if your debt is spread over a number of sources – store cards, credit cards, an overdraft, a bank loan. Different payment dates and interest rates may result in stressful financial juggling where it wasn’t necessary before.

But don’t worry. There are a few simple things you can do to help yourself and this guide will give you advice and tips on how to manage your debts in the best way possible.

Take charge of your finances

It can be easy to ignore debt but unfortunately, it’s not going to disappear if you do and so it is important to take charge and face your debt head-on. Here are some top tips on how to make a debt management plan:

  • Make a list of everyone you owe money to and gather together all the information possible on each loan. Make a calendar to remind you when each payment is due.
  • Sit down and work out your incomings and outgoings. Start with how much you earn and how much you spend on debt. Include everything from mortgage payments to electricity bills, from child support to your TV license.
  • Rank the debts from most important to least important. For example, you could lose your home if you don’t pay your mortgage or rent. So that’s a top priority. Other debts that have a lower priority, such as overdrafts and store cards, still need to be managed to minimise interest and charges and to limit any negative effect on your credit rating. Ensure things like bills are paid on time to avoid late fees.
  • Look at ways to reduce any repayments or pay off a credit or store card to reduce the overall interest you owe. To make this possible you will want to check your account balances and set yourself a budget (explained below). Think about each debt and write down realistic ways you could work with the creditor to manage the repayments.

Check your account balances

Is there enough money in your current or savings accounts to pay off one or more of your debts in one go? That could be enough to make the difference between struggling and managing debt more easily. Getting rid of one or two key payments could be all it takes to get you back on an even financial keel.

Set yourself a budget

You’ve looked at how much is coming in, and what’s going out in terms of debt. What’s left over is your budget. That could mean you need to make savings. It might be something as simple as switching to a different supermarket. It might take a little more than that. Sticking within the budget you’ve set, however, could prevent your financial situation from getting worse.

Talk to someone

If you find you really can’t make ends meet, don’t wait for things to get better – or worse – by themselves. Get some solid financial advice as soon as you feel yourself starting to struggle. You’ll find independent, impartial, confidential advice from organisations like StepChange, the Citizens Advice Bureau or National Debtline. Or you can speak to your bank. The earlier you take action, the easier it is to get the situation under control.

Take control

In some cases, debt consolidation could be the best way for you to get on top of your borrowing and sort out your debt. Add up all your monthly payments. Now consider whether you could borrow the amount needed for a new loan, clear your debts and have just one monthly repayment to manage.

There are a few things you need to think about before taking this option:

  • Your credit rating will affect the kind of loan you can take out, and the amount of interest you might have to repay.
  • Interest on existing debt. Make sure you’ve calculated these accurately. If you’re not going to be better off with a new loan, there’s no point in progressing this option.
  • How much do you need? Don’t be tempted to borrow more than you need to. This is about managing and reducing your debt, not increasing it.

Get debt advice and support from lenders

As soon as you feel your debts are becoming unmanageable, talk to your creditors. Being truthful with them about your situation and what you can afford to pay is vital as they are the most experienced people to talk to about debts. They will be able to provide you with the advice and support you need to help you manage your debt and repay in installments that you can afford. Talking to your lenders as soon as possible can prevent them from starting legal proceedings or getting debt collection agencies to contact you. Please ensure anything that is arranged between you and your creditor is sent to you in writing.

This article is intended as general advice only which is not intended to cover specific circumstances and needs. The information in this article is also not linked to any of the products offered by Clydesdale Bank PLC

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