There’s a huge array of financial advice that can rescue people from perilous situations. While some of it is irrelevant and some unsatisfactory, a lot more is perfect and applicable to your own lifestyles whether you owe £500 or £50,000. Below are some of the tips from experts in their fields – those who have turned finances around and turned peril into pounds.
Trim your bills: there are a huge variety of tactics and mechanisms which can help you trim utility bills, such as the use of price comparison sites to compare what services are better for you. Financial expert and TV personality Martin Lewis states that if you can’t find a service online, then consider phoning up your provider and simply asking if you are on its cheapest tariff – and if you’re not, then swap over. Also, consider looking at some of the smaller providers as opposed to the ‘Big Six’. Citizens Advice on gathering information: “Find any letters and emails you’ve had about your debts, along with the credit agreements you’ve signed. For each debt, you need to find the name of the creditor or lender; a copy of the loan agreement you signed (sometimes called a ‘credit agreement’ in your paperwork); and details of how much the debt is now.”
Money Advice Service notes that the risks of not prioritising debts include the danger of losing your home, the risk of receiving a court summons, being visited by bailiffs and bankruptcy. The top seven in order could be regarded as: mortgage, rent, council tax, child maintenance, magistrates court fines, tax, and county court judgments.
Gov.uk says that your options for paying debts include a Debt Management Plan (DMP) which is essentially an agreement with creditors to pay debts when you may only be able to pay off a small amount per month. A DMP may not always be right for everybody and some companies may charge you to set it up in the first place, but it will at least give you options to alleviate your debt. If a DMP is set up you will no longer have companies hounding you for money, but your credit score will be affected; however, with time and consistent payments it will start to rise again.
Another option is an Individual Voluntary Arrangement (IVA), which allows you to pay off some of your debt. There are many advantages and disadvantages of an IVA and whether its right for the applicant will depend on their individual situation. Debt specialists PayPlan however say the solution can help you become debt free within a certain period of time and due to the formality of the agreement, creditors are not allowed to charge interest for the duration of the plan. While an IVA also has disadvantages – you are placed on the Insolvency Register, you agree to pay into it for a set period of years, and your credit rating will be affected – it usually involves a percentage of the debt being written off so once your agreement is complete you can rest assured you will be free of any unsecured debts.
Look forward: Writing in Lifehacker, financial expert Denise Winston says that in planning how you will tackle debt in future, you should earmark any potential financial windfalls now. For example: “Cash gifts, bonuses, raises, overtime pay, and your tax refund should all be added to the payment for the loan you are currently working on, “instead of using it on an urge to splurge.” Winston also suggests decluttering your home and finding extra reserves through vouchers and coupons.