Debt management guide

Article Written By: BrookeWebb

Theres nothing more stressful than finding yourself with debt that is seemingly impossible to pay off ? but if youre in financial straits then dont despair. There are many ways of managing your liability and working towards a new, debt-free lifestyle. Whatever your situation, begin by seeking help. Whether you choose to confide in close family or friends or in a debt specialist or account, youll find that a problem shared really is a problem halved. An impartial advisor may also be able to suggest ways of managing your debt that hadnt occurred to you.

The next step is to confront your problem. Many people who are deeply in debt have no idea how much they owe or what they can expect to pay over the coming years. Its important to get a handle on the situation youre in before you take steps to change it. Dedicate some time to working out the size of your debt and the level of your repayments, grouping loans into high, medium and low interest groups. You can then begin to develop a budget that will be the basis of your debt-reduction strategy.

Once youve drawn up your budget, you should be able to get a better idea of your spending and where you might be able to cut back. Prioritising your loans from highest to lowest interest is also a good way to work out how to manage your repayments - pay off high interest loans first to instantly reduce your debt. However, there is more to debt management than simply curtailing your spending habits. In addition to cutting your outgoings, you could also think about how you might be able to increase your income. Are you set for a pay rise? Would it be possible to take on a second job? Use any bonuses or increases in income to directly pay off your debts.

For many people, of course, finding extra income simply isn't a practical possibility. In this case, it may be time to look at alternative means of debt repayments. One common route to take is consolidation taking out one larger loan repayable over a longer period to cover current debts. Alternatively, you could opt for a debt management plan with reduced interest rates.

The final resort is, of course, bankruptcy, but dont take this step unless you really have no choice. There are other intermediate options, such as an Individual Voluntary Arrangement or an Administration, which should help you pay off your debt without sacrificing your assets.

About the Author

Kristan Brangers has recently been looking into debt help offered by Baines and Ernst and is now creating a debt management plan.

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