How do you feel when the post arrives and it's your monthly bank statement scared, worried? Do you hide the letters under the sofa? It looks like you're having money problems.
Burying your head in the sand is the worst thing you can do. If you are finding yourself getting worried whenever the postman arrives, face up to your debts before they get even worse.
Here we have provided some simple ways to help alleviate debt problems.
Be choosy about credit cards.
There are many good, low interest credit cards out there, and if you're not making use of them, now's the time to start.
You will make significant savings, especially on large debts, by transferring your outstanding balance onto a card which offers a low introductory rate for balance transfers. Mint are currently offering ten months interest free but you will have to pay 2% of your balance to cover the transfer. The best deal on the market at the moment is Marks and Spencer, it's 0% for six months and there's no transfer fee to pay.
Also make sure that your credit card has a low rate for new purchases, many cards, especially store cards, have extortionate rates. Even better, stop using the credit cards altogether and cut them up so you're not tempted then you will only be able to spend the money you have. If that is not feasible, look at the latest HSBC deal it's 0% for 9 months for new purchases as well as on balance transfers - but there is also a 2% transfer fee.
People that switch credit cards to save money are called rate tarts' but we think it's just being sensible with money! The best offers are always the introductory offers for new customers, loyalty to a credit card company will just mean you pay more. So when your introductory offer is about to run out, get looking for the next best deal and transfer the balance over.
Loans to consolidate your debt
You see adverts for these all the time, and the concept is quite simple. You take out one single debt consolidation loan which pays off all your other credit card and loan debts, and then you just have one lower monthly payment to make. They can lower your monthly repayments by spreading them over a longer period of time, and by charging you a lower interest rate.
You have to be very careful though this kind of loan really is a last resort, so if you start spending money on some of those credit cards again then you could find yourself in serious trouble. Not least because the debt consolidation loan will probably have to be secured against your home. Most of these types of loans do require you to be a homeowner. If you get yourself into trouble and can't manage the repayment schedule, you could be looking at losing your house. It's not just another scare story, these things happen all too often.
Don't suffer in silence get help
There are many different people you can turn to for professional, free advice. The Citizens Advice Bureau have 3,200 branches throughout the UK and have specialist advisers on hand to talk things through with you, on the phone or in person.
The Consumer Credit Counselling Service is another very good option. They have a free national telephone service and are 100% dedicated to providing specialist advice to people with debt problems. From simple advice on sensible use of the credit card to drawing up an action plan to repay your debt and counselling for serious debt issues they are their for all your debt worries, however large or small. Look at their website for more information at: www.cccs.co.uk or call them straight away on 0800 138 1111.
The National Debtline is your other independent option. It's also free and completely confidential. See their website at www.nationaldebtline.co.uk and have a look at the personal budget section, debt advice and print out fact sheets for quick points of reference. You can also call them on 0808 808 4000.
Also don't forget, it's always a good idea to keep your bank/credit card company in the loop, they might be able to help you.
Plans to manage your debts
If you owe more than £5,000 to three or more creditors, the best option for you may be a debt management plan. This is an option as long as you can commit to paying £100 or more a month towards your debts.
The plan is run by a debt management company and you pay them a single fee each month, which they then apportion to each of your creditors. The creditors also agree to freeze your debts so they cannot attract any more interest or extra unpaid charges.
Ask the National Debtline or Consumer Credit Counselling Service about these plans as if you go through them, the cost of the scheme will be paid by your creditors. If you go with a private company, you may have to pay a fee to them.
Individual Voluntary Arrangements
Often shortened to IVA, an individual voluntary agreement is a legal agreement made through a county court that pays off your debts to your creditors, in turn the creditors agree to write off a portion of the outstanding balance. You agree to pay a monthly sum usually for 3 5 years, and your payments will be regularly reviewed to se if you can afford to pay more. You can pay off more quickly by the way of lump sum payments. However the agreement does cost thousands to set up, so it won't always be an option.
IVAs are best suited to people that are high earners, with the ability to pay quite large monthly amounts and also make lump sum contributions. Failing to keep up with the repayments will result in bankruptcy. A specialist Insolvency Practitioner takes care of the whole process, negotiating the deal with your creditors and administering your payment schedule.
The last resort - Bankruptcy
It might be the last resort but the amount of people choosing to take this option have increased by 33% in the last year.
There's a good reason why people choose to go this way: because even though you will probably lose your home to pay off your debts, 12 months later your debts are written off and you can start again from square one.
However there are a few issues. For example, your credit records held by the credit reference agencies such as Equifax and Experian will show that you were a bankrupt for the next 7 years, and every time you apply for a credit card or loan, the financial organisation will see those details. For a year or two, it will be extremely difficult to get any form of credit, but it will get easier as time goes on and you prove yourself to be a low risk again.
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