Investment/ Finance

How to Manage Your Debt

Even if you only have a small amount of debt, you must manage it properly so that it doesn’t get out of control. If you can pay off debts promptly or even ahead of schedule, then you’ll be repairing or improving your credit rating.

If you have larger debts, maybe large enough to keep you awake at night, then a visit to this site could give you invaluable advice and ideas for saving money, as well as informing you of your rights as a borrower.

However much you owe, these tips will help you to keep control of your finances.

Work out how much you owe and who you owe it to

If you make a spreadsheet of all your creditors, the amounts you owe them and how much you pay each month (including the payment date), then you’ve always got some encouragement as you see the amounts reduce. Every so often, you’ll be able to remove a creditor from the spreadsheet because you’ve paid off that debt!

You should update your spreadsheet once a month to keep it up to date and once one debt is discharged, try to increase the amounts you pay towards your remaining debts.

Always pay on time

Too many people forget to pay on the due date, or they deliberately hold back the money to pay for something else – either another debt or something unnecessary. Late payments can result in fees, so always try to pay on time. If you can’t manage to pay one month, then call up the creditor, explain the situation and pay as much as you can. You may be able to get the fee waived, but don’t rely on this.

Set an alert up on your smartphone for a few days before the payment’s due date so you can get ready for it or so you have time to call the creditor if there’s a problem. Don’t just ignore the problem and hope to pay double the next month because you may well be hit with a late fee, as well as extra interest and a default notice to the credit reference agencies.

Break out of the minimum payment delusion

Minimum payments will prevent your debt from growing, but you’ll never make any real moves towards paying it off. If you can only afford the minimum most months, then pay it, but if you can afford more – even if it’s only a few pounds – some months, then pay the extra.

Not all debts are equal

You have to work out which debts are your priorities. Credit card debt is usually your biggest priority because it carries the highest interest rates, so pay this debt down fastest. When it’s all paid off, use your sudden “extra” spare cash to work on your other debts.

Remember your other bills

You’ll never be asked to pay more than you can afford, so you’ll have enough to pay your living expenses. Don’t ever be tempted to spend this “living” money on anything other than your bills because you’ll end up in arrears, with late charges and more damage to your credit rating.

Get together an emergency fund

You might think that your savings should go towards your debt, which is commendable, but if you spend all your savings, you might not be able to repair your car or your boiler if either goes on the fritz. If your car’s bust, you might have to use expensive public transport to get to work instead, which will be very counterproductive indeed.

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