How to get out of debt in eight simple steps – and get advice for free
MILLIONS in the UK rely on costly credit to plug holes in their finances, with an estimated 26.9million people starting the New Year in debt.
The average household debt now stands at £8,088 not including any mortgage debt - with mortgages it's £59,840 per family.
Credit card debt alone averaged at £1,373 per person, according to the Money Charity's monthly statistics.
Unsurprisingly, many families are struggling and concerned that a small change in circumstances could land them in serious financial trouble.
Fortunately, if you've got debts hanging over you, there are things you can do. Here's our eight-step guide to getting back on track.
Work out what you owe
It can be really tempting to simply ignore your bills and stick your head in the sand about how much you owe.
Having a proper budget will help you figure out how much you can realistically afford to pay towards your debts each month.
If you can make cutbacks, the money can go towards paying down your debts.
Some bills like your rent, mortgage or council tax are classed as priority bills as if you fail to pay them you could be left homeless or end up in court.
Make sure you deal with these important debts first.
Then you should prioritise any debts that have high interest rates on them as the quicker you pay these off, the less money you well end up spending.
How to switch suppliers and save £300
SWITCHING suppliers is the best way you can cut your energy bills. Here's what you need to do:
1. Shop around - If you're on an expensive Standard Variable Tariff (SVT) deal you are throwing away up to £300 a year.
Use a comparion site like MoneySuperMarket.com or EnergyHelpline.com to see what best deals are available to you.
The cheapest deals are usually found online and are fixed deals - meaning you'll pay a fixed amount usually for 12 months.
2. Switch - When you've found one, all you have to do is contact the new supplier.
It helps to have the following information - which you can find on your bill - to hand to give the new supplier.
- Your postcode
- Name of your existing supplier
- Name of your existing deal and how much you pay
- An up-to-date meter reading
It will then notify your current supplier and begin the switch.
It should take no longer than three weeks to complete the switch and your supply won't be interrupted in that time.
3. Keep checking - Make a note of when your new deal ends, so that you can switch before you get stuck on an SVT again next year.
There are services, such as that will monitor energy company prices to see if you're on the best deal and automatically switch you if you could save money. This takes lots of the hassle oout of monitoring your bills.
Slash your household bills
Your budget will not only reveal what luxuries you can cut back on, but also if you're paying too much for your household bills.
Brits are being overcharged by as much as £300 a year by their energy suppliers by being stuck on expensive Standard Variable Tariffs (SVTs) instead of cheaper deals.
And it's not just energy where you can switch and save, shopping around for broadband, home insurance, car insurance and phone providers can also save you hundreds.
Make sure you check your mortgage too if you have one to make sure you're getting the best deal.
There are also some useful calculators that help you work out what you might qualify for.
For instance, this tool from helps you sort out income-related benefits, tax credits, contribution-based benefits, Council Tax Reduction, Carer’s Allowance and Universal Credit.
It explains what you should get, how to claim and even how your benefits will be affected if you work more hours.
For instance, you might be able to cut the cost of your council tax bill, depending on if you qualify for help.
Only those with excellent credit histories will get accepted for the best deals.
So when you apply, you could be accepted by the provider but be offered a smaller 0 per cent period.
Remember to always try and clear your balance before the period ends - lenders rely on you failing to do this so they can start charging you interest, typically at a rate of between 15 - 25 per cent.
If you still have some of the balance remaining when the deal ends, think about applying for a new 0 per cent card to transfer the balance again.
Make extra cash
Selling unwanted items and Christmas presents online can be a decent way of earning a little extra cash on the side.
Have a look around your house for any items you no longer use or want - clothes, DVDs, books - and put them on sale.
You can even sell things like old remotes, wedding dresses and old gold.
You might not make a fortune from them - but every little helps when it comes to paying down your bills.
If you're selling on eBay, make sure you set a reserve price, otherwise you might get less than what you wanted for your items.
You can also consider other ways to make extra cash such as taking a lodger, renting out your parking space, and being paid for filling out surveys online.
How to cut the cost of your debt
IF you're in large amounts of debt it can be really worrying. Here are some tips from Citizens Advice on how you can take action.
Check your bank balance on a regular basis - knowing your spending patterns is the first step to managing your money
Work out your budget - by writing down your income and taking away your essential bills such as food and transport
If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs
Pay off more than the minimum - If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker
Pay your most expensive credit card sooner - If you have more than one credit card and can’t pay them off in full each month, prioritise the most expensive card (the one with the highest interest rate)
Prioritise your debts - If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them
Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don't pay
Get advice - If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further
Groups like Citizens Advice and Money Advice Trust can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans
Speak to your creditors
If you've done all you can to cut down on your spending and you're still struggling to make ends meet, then it's worth contacting your creditors to see what they can do to help.
Speak to one of these organisations - don't be tempted to use a claims managment firm that will claim it can write-off lots of your debts in return for a large up-front fee.
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