How to beat debt

Up to 75% of consumers feel they are not to blame their massive debts, according to a survey. Yet taking charge of your debts is the first step on the road to sorting out the problem. If you are struggling to cope with your debts, don’t bury your head in the sand – I’ll help you get back on track…

Christmas is supposed to be a time for celebration. Yet for millions across the UK who are struggling with worrying levels of debt, spending more cash over the festive season just places further strain on both the bank balance and the mind.

What causes more concern is that many of us are taking an ‘ostrich’ approach to our debt problems - burying our heads firmly in the sand.

According to statistics from the credit reference agency CallCredit, a whopping 75% of customers believe they are not responsible for what the company calls "overindebtedness".

It’s a worrying trend that we are not taking responsibility for our financial well-being – but regardless of who is to blame for our debt problems, I am urging YOU to get a grip of your finances now – before they potentially spiral out of control.

The first step is to take a look at your credit profile by contacting a reference agency such as CallCredit, or alternatively Equifax or Experian. This should give you the complete picture of your financial situation and help you evaluate what action you need to take.

To gain perspective on the options available to you, check out the debt solutions section of moneysupermarket.com. Here you will find a guide written by independent expert Nick Lord, along with important information on the obtainable choices such as IVAs, bankruptcy, debt management plans and the choice that will be right for many – debt consolidation.

With debt consolidation you borrow enough to pay off all your other debts, including overdrafts and credit cards. Making one single monthly loan repayment can be cheaper – as long as you secure a good deal on the loan itself. It also helps you budget and regain control of your finances.

To do this you’ll need to find a good loan rate. Broadly speaking, here are the leading deals currently on the market based on various credit profiles:

For those with 'good' credit:

  • FirstPlus Exclusive – The lowest homeowner loan in the UK at 6.2% APR can only be found at moneysupermarket.com (not available on the FirstPlus website). It applies to loans from £10,000 to £100,000.

For those with 'fair' credit:

  • Norton Finance – A homeowner loan for any purpose with an attractive rate as low as 7.9% APR.

For those with 'poor' credit:

  • Ocean Finance – A homeowner loan rate as low as 10.9% APR with the option to fix for the loan term.

If you’re not a homeowner, there are plenty of attractive unsecured loans on the market too, including an offer from Alliance & Leicester at a typical rate of 7.4% APR.

The best approach is to use the SmartSearch loans comparison tool at moneysupermarket.com to evaluate the deals you’re likely to be accepted for. This will return results based on your credit profile and help you avoid further rejections that could harm your credit score.

This is especially important right now, amid growing evidence that borrowers are facing increasing knockbacks on loans, as banks get tougher with their lending criteria.

Many banks deny they are changing their criteria but internal research by price comparison site moneysupermarket.com shows they are. Despite the quality of loan applications remaining constant since April, accept rates have decreased in each of the past six months.

If you can find rates below those that you’re currently paying, then consolidating your debts into one simple monthly payment may be the best solution for you.

However, whichever path you choose to take towards regaining control of your finances the key is to make a budget and stick to it.

Don’t let the influx of more cash tempt you into spending beyond your means – use the money wisely so you have nothing to fear when the Christmas bells start chiming again next year.

THINK CAREFULLY BEFORE SECURING DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

DISCLAIMER: Please note that any rates or deals mentioned in this article applied at the time of writing and may no longer be available/applicable today.

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