With rising unemployment and higher living costs, many families across the UK are struggling financially – and falling further and further into debt as a result.
But whether you owe thousands of pounds to a variety of creditors, or have just a few hundred pounds of festive season credit card to pay off, the start of a new year is a great time to take control of your borrowing.
That’s why we have come up with some top tips to help indebted families back onto the road to financial freedom.
Set yourself a budget
One of the problems with debt is that, once you have made the necessary repayments to service your current borrowing, it is often hard to make it to the end of the month without having to take on further credit.
But borrowing more to make ends meet can only exacerbate the situation in the longer term.
The first step to debt freedom should therefore be to work out a household budget, which will need to include all your bills as well as the amount you spend on food, transport and other essentials.
You may well be surprised to see where your money goes. Doing this should also help you to see where you can make some changes to ensure that your outgoings do not exceed your income.
These include ensuring that you are not paying over the odds for the debts you have already.
Pay as little interest as possible
According to recent research, the average interest rate charged by credit card companies is 18.40%.
However, you can pay 0% for 22 months on balances transferred to the Barclaycard Platinum card (subject to a one-off fee of 2.90% of the debt being transferred).
To put this in perspective, a borrower with the average credit card balance of £2,069 could save a massive £272.35 a year by switching to this deal.
If, however, you are in any doubt about being disciplined enough to avoid further spending on a 0% card, a better option could be to consolidate your debts with a low-rate loan.
Marks & Spencer Money, for example, is currently offering £10,000 over five years at a headline rate of 6.0%.
Seek independent advice
If you are really struggling to meet your debt repayments, then the first thing you should do is to contact your bank or lender 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.
While there is no need to pay for debt management advice, it is also a good idea to contact a debt charity such as the CCCS or Citizens Advice.
These offer free, impartial advice and can explain the pros and cons of the various ways out of debt – ranging from debt management plans under which you agree to pay an affordable amount to your creditors each month to bankruptcy.
Which of these is right for you will depend largely on how much debt you have and, of course, your ability to repay it.