Mounting debt can seem inevitable when your living costs – and credit agreement costs – exceed your income.
But if you are finding it hard to manage financially, then it is vital to do your best to reduce your borrowings.
Otherwise, you risk being sucked deeper and deeper into a debt spiral.
Check out our five top tips to getting back on top of your finances – for good.
1. Consolidate your debt
Most people with a lot of unsecured (non-mortgage) debt tend to split the total amount between a variety of credit cards, overdrafts and loans.
If this sounds familiar, the best way to slash the interest you are paying, and get a truer picture of how much you owe, is to consolidate your debts on to a low-rate loan or a 0% balance transfer credit card.
2. Pay as little interest as possible
When consolidating your debt, it is important to shop around for the cheapest possible deal.
You can, for example, avoid paying interest altogether for up to 22 months with the best balance transfer credit card deals.
However, you will only qualify for deals of this kind if you have a good credit score, while you are also likely to pay an upfront fee of around 3% of the debt (which will be added to your new balance).
Other potential disadvantages of balance transfer cards is that they often only accept debts transferred from other credit cards – rather than overdrafts or loans – and that they charge high standard rates should you fail to clear the debt within the 0% period.
If you are in any doubt about being disciplined enough to avoid further spending on a 0% card, or are looking to consolidate overdraft and loan debts, a low-rate loan is therefore a more sensible option.
3. Set a budget
One of the reasons people find it hard to get out of debt is that, once they have covered their monthly repayments, there is little left over to live on.
Once you are paying as little interest as possible on your debts, you should therefore work out a budget that includes your household bills as well as spending on food, transport and other essentials.
All you need to do then is to stick to it, and to use it to see where any savings could be made.
4. Contact your bank
If you are already struggling to meet your debt repayments, then contact your bank or lender as soon as possible to discuss the situation.
Together, you may be able to find a solution such as a short-term payment holiday or reduced payments over a longer term – although this will become more difficult the more payments you miss.
5. Seek independent advice
For people whose debt problems have already started spiralling out of control, charities such as the Consumer Credit Counselling Service (CCCS) are there to help.
Solutions that they could suggest range from debt management plans, under which you agree to make affordable repayments to your creditors each month, to bankruptcy.
Just make sure you understand all the implications before signing up.
Take a look at this video to see how one family manages its debt.