How to Manage Your Debts
Falling into debt happens to the best of us, but if you’re in debt the last thing you should do is ignore the problem. Even the smallest debts can spiral out of control very quickly, so taking action fast should be your priority. So read on to discover what you need to do, to get back in the driving seat and manage your debts.
Identify the Problem
Before panicking about debt, you need to ask yourself if you are truly struggling to replay your debts, or wrongly prioritising your money. If for example, you are choosing to splurge on non-essentials rather than service debt, you should redirect all available funds towards your debts. If, on the other hand, you are struggling to meet your essential outgoings and your debt repayments, then you have a problem and need to face it head on.
The First Step
When debt is an issue, the first thing you should do is write down all of your income, expenditure, and debts to get a good picture of where you are. If there is any way of increasing your income, or using to savings to pay debts, you should set in that place. If you have no money spare, then you’ll need to prioritise your debts in order of importance, to help identify which ones you should focus on first.
Debts are classified as non-priority and priority. Priority debts are debts for which the penalty is very serious, such as losing your home or imprisonment, while non-priority debts are those for which the consequences do not badly affect your day to day life.
Priority Debts include:
- Mortgage Repayments or Rent
- Secured Loans
- Council Tax Arrears
- Court Payments
- Utility Bill Debts
- TV Licence
Non Priority Debts include:
- Credit Cards
- Unsecured Loans
- Hire Purchase Agreements
However, remember that non-priority debt defaults can still badly impact your credit record for up to six years. Check your report with Credit Cleaner to view your record and see if you’re affected.
Options for Action
If your income is very low, or you cannot service debt repayments, there are a number of ways of tackling the problem. These include; agreements with creditors to repay arranged by yourself, or help with arranging repayments through a free Debt Advice Agency or professional. However, if your debts are very large or you’re not confident of your ability to negotiate with creditors, then it’s strongly recommended to seek professional advice.
Other Debt Solutions
There are also a range of different plans and debt management solutions which can be set up in order to repay debt or have the amount reduced to an affordable sum. These include; Debt Management Plans (DMP), Individual Voluntary Arrangements (IVA), Debt Relief Order’s (DRO) and Administration Orders. To set any of these up you will need professional help and advice, as they must be administered by a qualified professional. You must also find out if you and your debts qualify under the different individual schemes, as each one is tailored to suit a particular amount of debt and income.
Wendy Lin is a successful female entrepreneur and painter. She is enjoying her quiet life with her family after moving to the countryside of England from the busy city of LA.