Realising that the amount of debt that you’ve accumulated has become unmanageable and you’re struggling to make ends meet every month can be a huge worry. Trying to find a way out of the debt cycle can be a challenge, but it is possible if you have an action plan in place.
Read on to discover some of our expert tips on the steps you’ll need to take, to free yourself from debt and start afresh.
Consolidate your existing debts
Trying to pay off existing debts with mounting interest rates can feel like an uphill struggle at times. Just paying off the minimum repayments on credit cards to cover the interest means that the debt term increases significantly, so it’s hard to see a way out.
However, by consolidating existing credit card and store card debts on to an interest-free credit card, not only will you be making single payment each month instead of several, but you won’t be paying off interest either. This means you’ll be able to clear the balance much more quickly and for less money.
The interest-free periods for these products varies from card to card, so do your research and consolidate your debts on to a card that offers you enough time to repay the balance in full, before the interest-free period comes to an end. This is critical because once that interest free period ends; you will begin to accrue interest on any outstanding amounts owed.
If you’re looking to clear some personal loans, then make a note of which loans are costing you the most money to repay due to interest rates and make a commitment to paying the most costly debt off first.
Make the most expensive loans your priority and commit to paying them off as quickly as you can is a smart step as you’ll save much more interest on these loans than by paying off the ones with more favourable rates.
Don’t be tempted to take out more debt
If you’re struggling to make ends meet on a regular basis, it can be tempting to take out another loan to help cover living costs and to ease the pressure, especially if you’ve already defaulted on some of your repayments.
Although consolidation loans are a good idea to reduce interest rates, don’t borrow more than you actually need as this will only serve to increase the amount you owe and the term that you’ll be in debt for.
If you are thinking of taking out a consolidation loan, then calculate the exact amount you’ll need to cover the other loan amounts including any early repayment fees and stick to that amount.
Seek Professional Advice
If your credit rating is poor and you’re struggling to be accepted for any consolidation loans or credit cards, then it’s well worth seeking professional advice to help break the cycle of debt you’ve found yourself in.
Many banks offer advice to help their customers, or you can turn to several government-funded agencies that offer free financial advice to help clients find a way out of debt. Make an appointment and take along the details of any loans or credit cards that you’re struggling with along with details of your income.0