Managing debt can feel overwhelming, especially when bills pile up and interest rates keep rising. It’s easy to get caught in a cycle of anxiety, unsure where to start. But there are practical steps you can take to regain control. With a bit of strategy and planning, managing your debt doesn’t have to be as daunting as it seems.
Prioritise Your Debts
The average UK household has £65,143 worth of debt. To take control of what you owe, focus first on those with the highest interest rates. For example, credit card debt often carries a much higher interest rate than a personal loan. By paying off high-interest debts first, you’ll save money on interest and reduce your total debt quicker. This method, called the debt avalanche, is an effective way to tackle your debts without feeling overwhelmed by smaller, lower-interest ones.
Consider a Debt Consolidation Loan
If you’re dealing with several debts, combining them with a debt consolidation loan can help simplify things. This type of loan puts all your debts into one, often with a lower interest rate than your current lenders. Instead of making multiple payments to different lenders, you’ll make one monthly payment, which makes it easier to manage. For example, consolidating credit card debt into a personal loan can help you avoid high interest and reduce the stress of managing various payments. Make sure to compare rates and terms to find the best deal.
Have a Look at Balance Transfer Offers
Another option is to transfer your high-interest credit card balances to a new card with a 0% interest rate for a set period. This gives you breathing room to pay down your debt without accumulating additional interest. For instance, if you have £2,000 in credit card debt, transferring it to a 0% interest card can help you pay it off faster. But remember, balance transfer fees can apply, and the interest rate will return to the regular rate after the promotional period ends, so plan to clear your balance during that time. Do some research on balance transfers first so you’re fully aware of the processes involved beforehand.
See if You Can Get an IVA
If your debt feels completely unmanageable, an Individual Voluntary Arrangement (IVA) might be worth considering. This legal agreement between you and your creditors helps you pay off what you owe in manageable monthly amounts over five years, often freezing interest and stopping legal action. However, it can impact your credit score, so be sure to consider it carefully.
Small Changes for a Big Difference
Although seemingly small, the above tips can help you take charge of your debt and start moving forward. Each small action adds up, bringing you closer to a debt-free future. Remember, managing debt is a journey, but with the right strategies in place, you can make steady progress and regain financial peace of mind.
