Debt is a part of modern life. In fact, according to the National Audit Office, around 8.3 million people in the UK struggle to pay off their debts or household bills.
There are lots of reasons people find themselves in debt in the first place─bad spending habits, relying on credit cards or simply living beyond their means. Some reasons are beyond our control like sudden unemployment, divorce and medical fees.
The problems start when you can’t pay what you’ve borrowed. All it takes is a few late payments and you quickly find yourself in a vicious circle of borrowing more to avoid late fines.
There’s no denying it’s a frightening situation to be in. But you mustn’t stick your head in the sand and hope it just goes away. Instead, ask for help as soon as you can so you don’t get deeper into debt and risk losing your possessions or house.
If you want to avoid having to sell your house to pay off your debts, read on.
Here’s are four easy steps to follow to help get out of debt.
Tip 1 Calculate how much you owe
To take control over your debt you need to know exactly how much you owe. Collect all your latest statements and create a spreadsheet with the following information:
- The amount you owe for each debt
- Monthly payments
- Interest rate
- Your income
- Current monthly repayments
- Any fines or penalty payments incurred
Tip 2 Prioritise your debts
Rank your debts using the following categories.
- Debt emergency – this is when you’re facing a court summons, bailiff action or disconnection. You need to address these debts quickly by seeking independent professional advice immediately.
- Priority debts – these are debts that carry the most serious consequences like court summons, bankruptcy and house repossession.
- Non-priority debts – for instance, overdrafts, credit cards, personal loans and money borrowed from friends or family.
Tip 3 Create a debt repayment action plan
Now you have listed and prioritised your debts you can start to create a repayment plan. Start slowly and focus on paying back one debt at a time starting with the most urgent, most expensive debt or one with the highest interest rate.
Here are some tips for making repayments:
- If you plan on overpaying, always check beforehand whether you will be charged a penalty fee
- Pay as much as you can or how much you are allowed to every month according to the individual lender policy
- Once you’ve paid one debt off, move to the next urgent of highest one.
Don’t worry, even if you can only pay a little bit, it will soon add up.
Tip 4: Identify ways to save money
As well as paying your debts off, it’s important to start saving too. Here are a few things you can do quickly and easily to help you save money and reduce your monthly expenditure.
- Research lenders with lower interest rates and change.
- Only use one credit card and set yourself a strict monthly limit.
- Don’t buy new, instead embrace a thriftier lifestyle by buying second-hand and repairing.
- Make weekly meal plans to help reduce your grocery costs.
- Make your own lunch rather then spending money on expensive take-outs.
- Turn off lights and save both money and energy.
- Quit smoking.
- Declutter and sell off unwanted things.
Need help to sell your house to pay off debts
If you’re struggling to sell your house to pay off your debts, you have a few options. You can use a company like House Buy Fast who have heaps of experience buying houses quickly for cash. And, especially if you’re in a hurry to make a debt payment, House Buy Fast will ensure your money reaches your bank account in a matter of days, so you have one less thing to worry about.