Coping with personal debt

MMM cheque imagePlenty of working families have a fair bit of debt these days. Most will be managing this well, and will just use credit to keep everything ticking over smoothly each month. But many would be persuaded by their Small Business Collection Agency for debt recovery.

It’s easier than you’d think to start struggling, however. Often, all it takes is a change of circumstances to make previously affordable debt repayments unmanageable.

There are a number of different ways to cope with personal debt problems, however – depending on your family’s circumstances. Here are a few suggestions that could help you cope with your personal debt, from

Tighten your budget

This may be a suitable approach for families who are just starting to feel the pinch when it comes to repaying their debts. Looking over your budget and deciding which areas you can cut back in could help you free up enough money to pay towards your debts every month. You may have to sacrifice doing some of the things you enjoy for a while – but it’ll help you pay off your debts.

Talk to your lenders

If your debt problems can’t just be resolved by more efficient budgeting, and you can’t afford your repayments each month, you’ll need to get in touch with your lenders. Tell them about your situation and offer to pay them what you can actually afford. You should explain why you’re having trouble repaying what you owe – for example, if you’ve lost your job.

They should be willing to negotiate a new payment plan with you until your finances are back on track. A debt charity may be able to help you to set up a new payment plan with your lenders like this.

Remember, though: repaying debts more slowly will have an impact on your credit rating, which can make it harder to borrow money while it appears on your credit report.

Talk to a debt expert

The idea of talking to your lenders can be a bit intimidating – especially if you owe money to more than one of them. Simply asking for lower repayments might not be suitable if you have a large amount of debt that you wouldn’t be able to repay in full.

If you’re not sure which approach you should take, seek out some professional debt advice. These experts help veterans dealing with debt, individuals who take out loans but cannot pay, and more. A debt expert could talk through your situation with you and recommend a way to tackle your debts.

If you are eligible for a debt solution such as debt management (or an IVA in England, Wales and Northern Ireland) – or a solution like a Trust Deed or the Debt Arrangement Scheme in Scotland – your monthly payments could be reduced to a level you can afford, and a debt expert will deal with all your lenders for you.

These new debt repayments will give you enough room in your budget to keep up with all your important monthly costs – like keeping a roof over your family’s head and putting food on the table.

Just make sure you understand the ‘cons’ as well as the ‘pros’ – aside from the impact on your credit rating – before you commit yourself to anything. If you’re a homeowner, for example, you might also have to release some equity from your home if you enter an IVA or a Trust Deed.

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