Everyone sees the level of debt that they have to deal with differently. For some, the idea of being overdrawn for just a couple of days would make them uncomfortable, yet alone paying for things on credit facilities and not paying them off immediately when the bill comes through. For others, being in debt is a part of normal life, and they might have multiple outstanding debts.
If you can keep track of what you owe and where, then the chances are that you’re managing your debts well. However, if you feel that debts have taken over your life and that you will never break free of them, then it could be time to seek some debt management advice.
Fortunately for anyone who wants it, there is plenty of advice to be found. Whether you contact a charity that specialises in debt issues or you speak to one of the many debt management companies that you can find online, they’ll be able to advise you on different ways to approach clearing your debt.
For people with a low level of debt but enough to be seeking advice, the first stage is usually to set up a debt management plan. Instead of paying your creditors individually, you can pay one monthly payment into a debt management plan – usually via a debt management company – that is then redistributed amongst your creditors.
Creditors are usually happy to work with debt management companies as they have an on-going professional relationship with them, and it saves them having to chase up debtors on an individual basis. A debt management company may be able to negotiate interest rate freezes on your behalf.
For people with more serious levels of debt, it may be suggested that you take out a larger debt consolidation loan to pay off multiple unsecured debts. This is good in theory as you often will get a lower rate of interest on a debt consolidation loan than on various existing debts like those on credit cards and store cards. However, you will probably remain in debt for a longer period of time as the debt consolidation loan will need to be paid off. You should also be self-disciplined enough not to start spending again until the consolidation loan is paid off.
If you have very high levels of debt it may be that you need to take out an IVA (Individual Voluntary Arrangement) or even declare bankruptcy. However, both these courses of action are far more serious than a debt management plan or debt consolidation loan and should only be taken as a last resort and with independent financial advice.