How much debt do you have? Are you struggling to pay off your debts? If yes, then you might want to consider some ways to get out of debt. 

There are millions of people in the UK who are currently living payslip to payslips. They struggle to pay their bills each month and often times they are unable to afford basic necessities such as food or rent. Being in debt can cause more headaches if left unresolved as it is possible some creditors may choose to send debt collecting agencies to resolve the issue.

Whether you have credit card, overdraft, mortgage debt or any other unsecured loan debt, the good news is that there are many easy ways to start paying off your debts quickly.

How Much Money Do You Owe?

The first step in progressing towards a debt free life is to first figure out how much money you owe and identifying your priority debts. Figuring out the categories of debt and how much debt you owe will help you work on getting rid of it by itself.

Overdue Payments

The easiest way to find this out is by logging into your online banking and looking at your statements. Look through them all for any outstanding payments. Once you’ve found all of your outstanding payments, add up all of those numbers and multiply that total by the payment amount. That will give you an idea of just how much money you owe with interest.

Credit Card Debt

Credit cards can be one of the most difficult types of debt to deal with because of all of the hidden fees and charges. The best thing to do if you have credit card debt is to make sure you use the lowest APR possible when making purchases. This will help you avoid having to pay high interest rates.

Ensure you check your credit card debt accounts to see how much debt you may have accumulated on those accounts. For most people, credit card debt will be the highest interest rate debt someone has so this may be the first type of debt you would want to clear down.

Other Debt

As there are various other types of debts (e.g personal loans) you could incur, ensure you figure out the total value you owe. This is massively important to ensure you can create a plan on how to tackle the debt and live a debt free life.

Although for most people the largest debt you will likely have will be a mortgage, I will not be covering a mortgage as part of your overall debt as this is often at a lower interest rate and I imagine this won't be the primary issue for most. If your mortgage is an issue then continue down to the section titled 'For Serious Debt Problems'

Create a Budget

Now that you have figured out how much debt you owe, the next step is to work out a budget so you can understand exactly where your money is going and how you can use your money to begin clearing down the debt.

You should always try to save as much money as possible from your monthly income whether in debt or debt free as you never know when an unexpected payment will come up. I won't cover budgeting too much within this blog post as I have another blog post on the page specifically related to budgeting. Check out that blog post below

The Best Apps for Budgeting - UK
 

However you decide to create a budget, whether that be through creating one yourself through a spreadsheet or using one of the apps listed within the mentioned blog post, it is crucial you understand exactly how much you can put towards clearing down your debt. This will also give a clear indication to whether or not your in too much debt to be able to fix the situation.

Begin Tackling Debt

Now your ready to begin tackling your debt. Once you know exactly which debts are your priority debts and exactly how much you can afford for your monthly payment, it's time to start working out a plan. It's always a good idea to start by tackling debt with the highest interest rate as these usually cause the most harm over the long term.

Initially it would be a good idea to call up any of your creditors directly to see if there is a way that they can reduce the monthly payment. Although it's unlikely you'll get a reduction in your debt, they may be able to help you come up with plan to pay back what you owe in a more realistic manor.

Checking the different types of debt management plans (DMP) that are available may also help alleviate the situation. A DMP is a plan that you can set up where you agree to pay a single monthly payment to cover your debt essentially collating all of your debt into this one monthly payment.

Debt management plans can vary widely in the payment size and the duration of the plan depending on your situation. As long as you're able to cover minimum payments of £5 every month towards each of your debts, anyone can set up a debt management plan. Also, if your income changes at some point then you may choose to increase the amount you pay towards clearing down your debt through a debt management plan.

You can cancel your debt management plan at any time if you feel it isn't the right debt solution for you or if you're struggling with paying off your debts. If you haven't paid off your debt yet, you'll need to contact your creditors so they can arrange another way for you to pay them back.

It is also important to note that if you do decide to go with a debt management plan, your creditor may decline going down this route in order to get there payment. There is no legal requirement that a creditor has to agree to a debt management plan.

For Serious Debt Problems

We are not professional financial or debt advisers. Everything we mention in our blog is not to be taken as financial advice. Before going along with any information listed within this article or especially for serious debt issues, you should contact a professional debt adviser who can provide professional help for these sorts of situations.

You can apply for a Debt Relief Order or Bankruptcy Order if you cannot pay your debts because you do not have enough money or assets you can sell.

Source: (gov.uk)

Summary

In summary, there are many ways to get out of debt but it all depends on how bad the problem is. The first thing you need to do is determine how much you owe and how much you can afford per month to pay off the debt. If the situation still seems uncontrollable then call a professional debt adviser to provide the sufficient advice required.

I hope you found this article helpful and if you are currently going through debt issues at the moment, I wish you well on alleviating the issue.

Thanks for reading 😀

FAQ

Where you can get help?

The Money Advice Service has information about debt management and free debt advisory services.

Source: (gov.uk)

How do I prioritise paying off my debts?

One of the most common ways to prioritise paying off your debts is to start by paying off the one that’s costing you the most money, which is normally the one that has the highest rate of interest.

Source: (raisin.co.uk)

Which debt solutions write off debts?

Insolvency solutions to write off debts in England, Wales and Northern Ireland Bankruptcy :A form of insolvency that writes off unsecured debts if you can't afford to repay them. Any assets you have, such as a house or car, may be sold to pay off your debts Debt relief order(DRO) :A way to have your debts written off if you have a relatively low level of debt and have few assets Individual voluntary arrangement(IVA) : A formal agreement where you to make affordable payments to your debts, usually over five or six years. You can also make a one-off payment, so the IVA lasts for a much shorter time Insolvency solutions to write off debts in Scotland Sequestration, or Scottish bankruptcy : A form of insolvency that writes off unsecured debts if you can't afford to repay them. Any assets you have, such as a house or car, may be sold to pay off your debts trust deed : A legally-binding agreement where you make reduced payments over four years, then your unsecured debts are written off Minimal assets process (MAP) bankruptcy : Another type of bankruptcy, aimed at people with a low income and not many assets bankruptcy These insolvency measures have many advantages over trying to make agreements direct with your creditors to write off debts. Insolvency is legally binding and creditors included in the solution usually can't do anything to get their money back.

Source: (stepchange.org)