Most of us need some kind of debt just to get by – a mortgage, a credit card for emergencies, an overdraft for unexpected costs, etc. The repayments can be inconvenient (to say the least) when there are other things you’d sooner spend that money on!
Here are some ideas for tackling three common debt problems: paying too much interest, out-of-control debts and general anxiety about debt.
Overpay Debts Where You Can, to Save Interest
The more quickly you repay debt, in general, the less interest you’ll repay overall. This is true of interest-charging credit cards and overdrafts, but it might also be possible with your mortgage (although there may be an early repayment fee).
If you borrow money on your credit card and repay within the month, you won’t be charged any interest at all. If that isn’t possible, an overdraft may be a cheaper alternative form of borrowing, or you may qualify for a 0% interest balance transfer credit card (subject to a balance transfer fee).
Get Professional Help with Problem Debts
If you’ve lost control of your unsecured debt repayments, you need to gain control again – you could start by seeking debt advice from an expert. Debt management, for example, could allow you to lower your monthly repayments for as long as you need to, until your circumstances improve – although this would affect your credit rating and lenders don’t have to agree to it.
More serious debt problems could lead to insolvency, although that doesn’t have to mean bankruptcy. A debt expert could tell you about other ways to go insolvent, such as Individual Voluntary Arrangements (IVAs) and Debt Relief Orders.
If you’re basically on top of your debt, but you feel bad about how long it will take you to repay it, try the ‘feel better about debt’ tips below.
Feel Better About Debt
Give a bit to charity if you can afford it – things may be bad but there are always people in a more difficult situation. You could feel better about your finances if you help others, and it might help you see your problems in perspective.
Deal with other issues – if debt is (partly) caused by other problems in your life, get help to address these issues. At the same time, you may find that dealing with debt problems actually alleviates bad feelings you were having about other aspects of your life.
Keep your goal in sight – work out how much better off you’ll be financially once you have repaid your debt, focus on the future and plan all the interesting things you’ll do with the spare money you will have.
Be proud of what you have achieved – keep a record of how much you have repaid as you go along. Take a sense of achievement in how much you have repaid and how much closer to your goal you are.