Moneywise's 10 steps to cutting your debts.
1. DON'T IGNORE IT
Not only will your debts rack up more interest but it's likely that the best efforts to ignore the debt won't stop you feeling stressed about it.
2. TELL CLOSE FAMILY AND FRIENDS
By telling others you are admitting to yourself also that you have a debt problem - and the relief of sharing your money worries can be a huge stress-reliever.
3. NOTIFY YOUR BANK AND CREDITORS AS SOON AS POSSIBLE
The Lending Code requires financial institutions to act with sympathy and advice where possible. You may be able to freeze interest or arrange to pay smaller monthly payments to your lenders.
4. DRAW UP A BUDGET
You may know you owe a lot of money but do you know how much money is going in and out of your bank account? A budget will show where you're overspending and where you can make cutbacks.
5. SEPARATE ESSENTIAL AND NON-ESSENTIAL DEBTS
Although the interest you have to pay on unsecured debt such as your credit card may be higher than your mortgage, missing payments on secured debt is much more serious because failing to keep up the payments could result in you losing your home.
6. PRIORITISE DEBT REPAYMENTS
After prioritising secured debts, make sure you start by clearing the highest-interest debt first. It may be worth consolidating your debt into one loan so that you can keep up with all your payments more easily or, if possible, moving it onto a lower rate credit card.
7. STOP SAVING
The amount of interest earned in savings is paltry compared to the rate at which loans' interest rates rack up.
8. SEEK DEBT HELP
There are plenty of free debt advice charities and services at your disposal.
- Advice UK - doesn't provide advice but can direct you to local partners that do
- Citizens Advice
- National Debtline
9. CONSIDER ALL OPTIONS
Going bankrupt or seeking an IVA are also both viable options for those in serious debt – and shouldn't be ignored out of pride or shame.
10. STAY POSITIVE
By taking pro-active steps and being open about your debts you can remind yourself that you're taking steps towards getting out of the red.