If you owe money to your creditors and need help with debt, then taking support from the government or debt management companies can be beneficial. As they can provide you with various solutions to write off your debts. They also come up with effective plans to manage your existing debt properly.
Generally, there are 2 types of debts. First, the non-priority debts that are due to your credit card or store card payments. Secondly, the priority debts like mortgage, rent, energy bills, which shouldn’t be ignored. The consequence and risk of it are higher than the non-priority debts.
Debt is a big issue if left unpaid, which is why debt management came into the picture. Although there are some organizations and government policies that can help you out when you need help with your debt.
What you can do to Manage and Reduce Debt?
If you feel worried about your debt, then it’s best to take control of it. Sometimes, borrowing more money can solve your problem temporarily but, it’s expensive and puts you in a bad position with your credit score.
So, are you in debt need help? If yes, then to manage it effectively do the following things:
1. Sum-up Debts
If you owe money to more than one creditor, it’s better to have a clear picture of your total debt. There are many debtors in the UK who keep asking “what to do if I need help with debt?”. In case you are amongst them, try to estimate your overall debt first.
So, if you don’t know how to do that, write down the money that you owe to each creditor on a piece of paper. Then add them all together to get an overall estimation of the debts. This will help you prioritize your debts faster.
2. Prioritize Debts
To save more money and clear your debts, you need to sort your priority and non-priority debts.
Hence, go through the list you made and segregate them.
Priority debts include:
- Mortgage, rent, bond, etc.
- Gas and energy bills
- Child maintenance
- Taxes and court fines
- Agreements made for essential items
Non-Priority Debts Includes:
- Credit card or store card debts
- Payday loans or water bills
- Overdraft dues
- Catalogue debts
- Unofficial money borrowed from friends
- Debt in banks or any building society loans
Now as for preference, the most expensive debts in your non-priority list must be paid first. As they charge high-interest rates on your amount.
If you still need help with debt, try talking to your creditors. Also, ask whether they can shift your account onto a cheaper deal. Otherwise, you can find extra money by saving and properly budgeting your expense.
Sometimes, you may come across posts on various debt advice forum from debtors in the UK. Most of them have this query regarding “I need help with my debt”, followed by explaining their financial situation.
So, the best way to deal with this is by shifting all your debts into one or two places. As it can help in focusing more on a single debt thus, relieving you from the extremely stressful situation. By doing this you can decrease the cost of your debt as well.
In Credit Cards
If you owe a credit debt and have a fairly good credit score, you can save a chunk by transferring it to a 0% interest deal.
But before transferring your debt, read the terms and conditions carefully to avoid any surprise charges. If you can’t get any 0% interest deal, then it’s worth contacting the bank for any lower interest option on your existing cards.
Sometimes, moving your most high priced debt to one of the lowest interest rates might help in cutting down interest on your debt.
Store cards are used to make payments for a specific store and can work as an alternative to a credit card. These cards are bought to get exclusive rewards and discounts from the store but, may come with high-interest rates. So before using such cards in any specific store, it’s practical to read about the charges and interests carefully.
Any existing balance on the store card can be easily transferred like a normal credit card balance.
If you are paying high interest on a personal loan, then it’s better to look for an alternative loan with low-interest rates that pays it off. Hence, make sure you read all the necessary documents before applying for a loan.
4. Find Extra Source of Revenue
If you need help in getting out of debt, then try finding an extra source of income. But before you do so, consider some things:
Making a proper budget can help maintain your debt. Especially if you overspend your money on useless things. So, you can make your budget keeping in mind your daily expenses and the monthly income. Also, it depends on how much you owe to your creditors. Divide the amount into payments for several months and follow it ardently to see the result.
- Sell Unwanted Items
If you have any unwanted items that you don’t need or use anymore, try selling them for extra cash. Be it your clothes, any electrical appliances or even household items.To sell your items easily and quickly, you can list them on Facebook, Bidorbuy, Gumtree, and similar websites.
You can also downsize your home for mortgage or even sell your car for a large amount of money.
- Switching Providers
If you are trying to save extra money, it’s better to switch to better utility providers that offer the cheapest deal. You might check up on promotional offers for your energy, mobile phone, Internet among others to save some money.If you are not locked into a fixed or discount rate deal with early repayment charges, then you can easily change your lenders whenever you like. Even a difference of 1% can save some significant amount a year.
If you were saving money for any future crisis, you can consider paying off your debt with it. As the interest charged on borrowing more credit will be higher than the interest you earn on your savings.
But before you pay off your debt early, make sure there are no additional fines or tax attached to it.
6. Consult a Debt Management Advisor
Whenever you think ‘I need help getting out of debt’, its best to find a debt management advisor for exclusive solutions. As he/she can come up with an effective plan to clear off your non-priority debts completely.
Below are some of the options that you can consider if you’re struggling with your debt.
- Debt Management Plan (DMP)
It is an informal agreement between you and your creditors to pay all of your debts completely. Here, both parties can come up with a minimum amount that needs to be paid regularly each month to your creditor.So, the advisor talks to your lenders on your behalf. You make the minimum repayment towards the debt management company each month until the debt resolves. The company then divides the money and distribute it to all your creditors.
However, it’s advisable to take the help of a debt management company to set up this process. As they might clear most of your queries including “I am in debt and need help”.
Although you can also do it on your own, the debt management company will reduce most of your legwork. But, if you are applying for the DMP, make sure all your creditors agree and are in line with your plan.
- Debt Counselling
It is a formal legal process that is designed to help consumers who cannot repay their debt. The counsellor will negotiate with your creditors for a new repayment plan and also obtain a court order on your behalf. The debt counsellor should be registered with the Financial Conduct Authority (FCA) to apply for any court orders. Once the court accepts the services of a debt counsellor, you will be protected from any legal action as long as you pay according to your new arrangement.
You will be under the Credit Bureau list for undertaking a debt counsellor. Along with that, you won’t be allowed to take any other credit until you are issued with a clearance certificate.
Moreover, a clearance certificate will only be issued when you have successfully resolved any obligations inlined with the FCA and set by the court.
- Administration Orders
If you have a Country Court or High Court judgment against you, you can apply for an Administration Order. In this way, you can deal with your debt if you cannot pay it in full.In this arrangement, you make only 1 payment per month to your local court. The court then divides money to all your creditors accordingly. To be eligible for an Administration Order, your total estimated debt should be less than £5000. Also, you should owe debts to at least 2 or more creditors.
If you apply for an Administration Order, then you will be listed in the Register of Judgments, Orders and Fines, etc. This would stay on your credit report for a period of 6 years from the date of order. Besides, it may affect your credit score and also hamper the process while taking credit in the future.Tips to Get you Started with your Debt Problem
If you are seeking answers to need help with my debt question, go through the following information. Here are some tips to help you start recovering your money if you need help with debt.
- If you want to take control of your debt, get a copy of your credit file. This will give you an insight about your debt and can help you plan accordingly. You can also view your credit file from Experian, Equifax, and Call Credit.
- Segregate your debt according to its priority. Make a folder for each of your debt and maintain proper records. This will be beneficial not just for you but, also for the debt company if you are seeking their advice.
- Do not pay anyone or take any extra credit before consulting with someone. There are some free advisory services that give free consultant to consumers. You can reach out to them either by phone or email.
- Don’t pay any amount from your savings, as they may negotiate or apply a hidden tax on it.