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Hints and tips on how to manage personal debt
We have talked about the rising levels of debt and have so far looked at refinancing to consolidate debts through secured loans and remortgaging. For non- homeowners these are not an option.
Average personal consumer borrowing via credit cards, motor and retail finance deals, overdrafts and unsecured personal loans rose to an average £4,550 at the end of March 2007 according to the charity Credit Action and with the number of credit cards in the UK totaling 183 million in 2005 this equates to a staggering 4 credit cards per consumer in the UK.
So, how can consumers manage these debts? I have listed some hints and tips on how to manage your personal debt and make steps to get out of debt.
1. Shop around for credit cards offering 0% on balance transfers and purchases. There are hundreds of cards out there and its about finding a card that will give you the best benefits. But make sure if you go for a 0% promotional offer that you find out the Apr and the terms once the promotional offer is over. If the interest rates rise rapidly make sure you either plan to swap another promotion with 0% balance transfer rate. Another option is to choose a card with a low interest rate for the life of the balance as this means you won’t have to continuously search for new promotional offers every time your current one ends.
2. If you can try and consolidate all your debts onto one credit card or one loan as this allows you to keep track more easily of what your debts are and what progress you have made in m paying them back.
3. Cut up your credit cards! So many consumers cannot resist putting purchases on a credit card so take away the temptation and get rid of them so that you cannot add to your debt.
4. Write up a budget, totaling all you necessary expenditures within a month. Try and cut back on unnecessary purchases and if you can afford to increase the amount you pay off your credit card each month. Even paying off an extra £10 a week could mean you have paid an extra £480 within the year. Its all about planning.
5. Set yourself a weekly allowance and take it out of your bank account at the beginning of every week. Paying by cash allows you to see more effectively what you are spending money on and once you see your cash budget dwindling before your very eyes the non essentials will soon become less attractive.
6. Close your old credit card accounts. If you have credit card accounts that you have paid off and no longer spend on then write tot the credit card company and close the account. This can affect you when it comes to getting finance in the future as some companies will look at how much credit you have, they may not see that although your old credit cards accounts allow you access to £10,000 you have not taken them up on the offer.
7. Also ask to be taken off mailing lists as it can add to the temptation. According to Credit Action it has been estimated that banks & finance companies sent 1.26bn items of junk mail such as credit card offers and invitations for loans in 2005. This works out at approximately 27 enticements to take on new credit per adult.
8. And finally… be sensible! Think about your long term financial goals. The way you spend now can affect your credit history for the future. If you make purchases you cannot afford to repay then you could get adverse credit and looking for mortgages in the future can become problematic or you can be charged higher interest rates so make sure you are sensible with your finances. Never over commit or overspend in comparison to what you earn.