Do you know anyone under the age of 50 who isn’t in debt? Probably not.
Britons owe an eye-watering £72.5bn on credit cards alone.
If you’re one of the 8.3 million people who are currently over-indebted in the UK, then you’re probably aware of how stressful it is staying on top of your finances.
There’s no shame in getting into debt. But, ignoring it is a big mistake.
Getting seriously in arrears with your debt repayments can lead to whole range problems. Like getting a bad credit rating that will prevent you from securing a mortgage or even a job in the future. Yes, some recruiters check your rating. Other outcomes include being chased by debt collections agencies, bankruptcy and even having to sell your house to avoid repossession – so serious stuff.
But you can easily avoid these scenarios by taking control of your finances. Here are seven ways to help you get out of debt and avoid house repossession.
#1 Work out how much money you have
Create a spreadsheet and write down everything you owe including the total amount you need to pay off and your monthly repayments. Include all credit card debts, debit cards, student loans, car loans, money borrowed from friends or family and your mortgage.
Next, add up your income e.g. salary, other income sources.
Lastly, calculate your monthly expenditures like utility bills, tax, groceries and travel costs. Then deduct the sub-total of all your priority outgoings from your total income leaving you hopefully with your disposable income.
#2 Work out what you owe and to who
Having lots of debt can feel overwhelming. You might be wondering where do you even start?
The first thing to understand is that there are different types of debt. To work out what you should focus on first, sort our all your debt into three different categories.
Priority debts – These things like debts that generate court fines when not paid, gas and electricity bills, tax, mortgages and any loans you have secured against your home.
Non-priority debts – e.g., overdrafts, personal loans, money borrowed from friends or family and credit card loans.
Debt emergencies – e.g., notice of court action, eviction or bailiff action. If you’re facing any of these, you must seek advice immediately.
#3 Prioritise your debt
Start by focussing on paying your priority debts off first as these carry the most serious consequences. For instance, if you don’t pay your utility bills you could face disconnection and penalty fines. Or if you get in arrears with your mortgage you could face house repossession and bankruptcy.
#4 Contact your bank
Contrary to popular belief, it’s not in your bank’s interest to allow you to go bankrupt. As soon as you find yourself in difficulty, contact your mortgage lender and explain your situation. They will be able to advise you on how to proceed. For instance, maybe you can change your mortgage to one with a lower interest or take a mortgage holiday to help you get back on your feet.
#4 Cut up credit cards
If you’re struggling to control your spending, or you’re using your credit cards to pay off other debts – you need to stop. Contact your credit card provider and find out if you can transfer your balance to another card with a lower interest rate. But, also, stop spending and getting yourself further into debt. Schedule regular spending freezes into your monthly budget. Review your spending habits and identify where you can save money. And, if you want to remove all spending temptation, cut up all your credit and store cards.
#5 Pay the more expensive debt first
Firstly, never miss your monthly minimum debt re-payment. Secondly, focus on getting rid of your most expensive debts first. These are the ones with the highest interest rates or charges. Just make sure you check if there any penalty fees for overpaying.
#6 Save money by downsizing
Look at ways you can generate more monthly income. For instance, if you’re a two-car family, downsize to one. Or downsize and move into a smaller property that costs less to run. Change lifestyle habits too like instead of going out, eat-in, have weekly meal plans and avoid take-aways.
#7 Track your spending
Start each day by checking your bank balance. This way you’ll know exactly how much you have available to spend so you can set limits. Sounds simple. But this will help you gain greater control over your finances as you’re forced to engage with them daily.
Need help selling a house to avoid repossession
If your home is under threat of repossession, you need to act immediately. If you speak to House Buy Fast, they can help you delay or even prevent the repossession from going ahead. Through a hassle-free process, they will buy your home for cash, quickly. So, you only wait a few days before you get your money.