As the recent recession continues to claim more and more jobs, people are becoming increasingly aware of the impact redundancy can have on their financial situation. Should you find yourself with serious debt problems, we can help with both general advice and more formal debt solutions. But, before you get to that stage, there are steps you can take to avoid the debt trap.
Of course, avoiding debt in the first place is easier said than done, but there are some rules to follow that might help:
- Manage your credit cards
It may seem obvious but don’t spend more than what you can afford each month.
If you have a credit card, shop around to find the best interest rate remembering that the interest rate you’re offered may only apply for a limited time. Keep a note in your diary of when the promotional rate finishes so you can shop around and find another deal before the low rate comes to an end.
Debt consolidation involves taking out a single loan to pay off your creditors so that you’re only paying one monthly repayment to one creditor. It can be a good way to simplify your monthly finances and may save you money in the short term as the repayment amount may be lower than the combined repayments you’ve been paying to numerous creditors.
If you have a mortgage on your home, another way to manage debt is to remortgage to release some of the equity you may have. Borrowing a larger amount of money than is owed on your existing mortgage, allows you to pay off any other debts. However, it may mean you will end up paying more interest on your mortgage.
Saving or clearing debt?
Most people recognise that paying off debts is the top priority before starting to save money because the interest rate on the cost of debt is higher than you will recoup on savings. So pay as much as you can to your debts. Prioritise in order that you pay to the debts with the highest interest rate first.
Follow these tips and avoid getting into a spiral of mounting debt. If you do find yourself in financial difficulty, talk to us. We can help with debt advice or a more formal solution if that is what you need.