Coping With Debt

As has been particularly highlighted in recent times, a growing number of people are having trouble coping with debt. The banks have sold loans and mortgages to people who can’t afford to pay them back, and the people who bought the loans and mortgages they can’t afford find themselves struggling with an insurmountable financial burden.

There have been many headline grabbing initiatives to try and alleviate the pain of having accrued unmanageable bad debt, but many people still don’t know where to go in order to get this help, or how to go about managing their debt.
In the UK, the most obvious place is the Citizens Advice Bureau (CAB). The CAB is always a good place to start as it serves as the hub for any information and/or services that the government can provide.

The first step to take in managing you debt, and what the CAB will probably tell you to do, is to write down all the money that you owe, and all the repayments that are due. This includes things that you are managing to keep up with the repayments on. You need a comprehensive overview of all of your outgoings vs. all of your incoming. Take care to include all other outgoings such as food and entertainment.

If you’re struggling, you will most likely find that your outgoings are higher than your incomings (otherwise you wouldn’t be in trouble and having to carry out this exercise). The next step is to prioritise your debts – rent, council tax and utilities have to come at the top of the list. Then inform all of your creditors of your situation, you may find them more sympathetic than you think.

If you’re lucky, your various creditors may allow you to pause your repayments for a time, or decrease your regular payments over a longer period. In this way you may be able to bring your repayments down to a manageable level.

If this approach doesn’t work, it may be worth considering a debt consolidation loan. In this case you will take out a loan to pay off all of your existing debts, and then just have the one debt to pay off each month, which will come out less than paying off your debts individually. If that is not the result of the loan, there is no point in taking it: be careful with this option.

The worst case scenario is bankruptcy. This will clear all of your debts and allow you to start again, but will badly damage your credit rating for a couple of years.

There are plenty of people out there struggling with debt with no idea what to do about it. The first thing is to face up to it and not be ashamed – you are not alone. The second thing is to seek help.

By: Mike Peacock

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For further advice on debt help and repayment loans visit How To Books, where you will also find advice on writing off debt.