How To Get Out Of Debt In The UK

There are many instances in life where we may consider turning to finance companies for a little extra help. This might be to aid in buying a home, to start a business, to cover emergency expenses, or even to buy a dream holiday. But when the debts start to build up, we might be left in a difficult financial position and looking for answers on how to get out of debt. Thankfully, there are several solutions to try, including debt consolidation loans and establishing a debt management plan, so there is plenty of help out there.

At Debt Consolidation Loans, we believe in offering as much advice as possible to help you find the best credit solution for your situation. On this page, we will be detailing when you might start looking for help to get out of debt fast, and the best ways to get out of debt to future-proof your finances. Hopefully, this page will provide you with the resources you need to start getting out of bad debt.

how to get out of debt in the uk

Why debt consolidation?

  • Improve your monthly budget
    A debt consolidation loan will enable you to group all your existing borrowing and the monthly repayments are easier to manage.
  • Reduced overall repayments
    A debt consolidation loan could even save you money each month if the interest rate is less than the combined total interest of the previous loans.
  • Improved credit rating
    The simplicity of repaying a debt consolidation loan means that you are more likely to repay the debt on time every month. This will prove you to be a responsible borrower, which will have a positive effect on your credit score.

 

What Is Considered As Debt?

The simple definition of debt is money that is owed to a person or company that you have borrowed money from with the intention of repaying. However, the idea of debt goes a little deeper than this and there are various types of debt. Some debts are considered good and some are considered bad, so effectively, some debts could be considered as worse than others. Some common types of debt include mortgage payments, student loans, and personal loans, but other arrangements that need to paid regularly, such as credit cards and medical bills can also be considered as debts.

Good debt is defined as debt that create anything of value, such as school loans or home loans. Each of these debts offer a positive end goal, whereas bad debt is something that is invested in anything that depreciates. This can include credit card debt or a car loan, both of which are used to purchase items that lose value while the interest rate causes the cost to increase.

The Importance Of Getting Out Of Debt

Getting out of bad debt takes perseverance and motivation, so if you want to keep up the momentum, you should remind yourself of the reasons why you are on this journey. These reasons could include:

  • To increase your financial security – mounting debts can be a serious threat to your financial security because what you spend on your repayments could instead be saved for your retirement, your children’s education, or even a rainy day fund.
  • To reduce stress – no one enjoys being stressed in general, but financial stress can be particularly uncomfortable. A little stress every once in a while isn’t harmful, but constant stress can lead to serious health issues, such as migraines and even heart attacks. In some cases, the best ways to get of debt can help your health in the long term.
  • To reduce the number of bills you pay – the more money you owe to different providers, the more bills you need to keep up with. Once you become debt free, you will have fewer bills to pay each month, so you could find managing your finances a little easier.
  • To improve your credit score – too much debt can have a negative impact on your credit score. When your outstanding balances are high in comparison to the amount you originally borrowed, your credit rating takes a hit. By paying off your debts, you may see an improvement to your credit score over time.
  • To spend on the things you enjoy – we all love to treat ourselves from time to time, and if you need to pay off your debts, spending on yourself may make you feel guilty. By looking to get out of debt fast, you may be able to end the cycle and free up your money to buy the things you really enjoy.

The importance of getting out of debt is different for everyone, but by keeping your reasons in mind, you can stay on track and hold yourself accountable if there are any slips. The good news is that if you have found yourself in unmanageable debts, there are several things you can do to aid your circumstances.

Why debt consolidation?

  • Improve your monthly budget
    A debt consolidation loan will enable you to group all your existing borrowing and the monthly repayments are easier to manage.
  • Reduced overall repayments
    A debt consolidation loan could even save you money each month if the interest rate is less than the combined total interest of the previous loans.
  • Improved credit rating
    The simplicity of repaying a debt consolidation loan means that you are more likely to repay the debt on time every month. This will prove you to be a responsible borrower, which will have a positive effect on your credit score.

 

How To Get Out Of Debt Fast

While some debts, such as mortgage payments, can be unavoidable, you should try to reduce any other unnecessary debt. Once you have formulated a plan and stick to it, you could find yourself debt-free for the future. Follow the steps below to get started.

  1. Gather Your Data

The best place to start is at the beginning, so before you can learn how to get out of debt in the UK, you need a complete picture of your finances. You will need to gather:

  • Your most recent bill statements for all finance providers
  • Your credit report, so you can check for accuracy and to identify all your debts
  • Your credit score to see if you are able to lower interest rates

Once you have all of your information together, you should be able to list all of your debts. Write down every creditor’s name, the outstanding balance, your minimum monthly payments, and the interest rate. You should also form a monthly budget that includes everything not included on your credit report, such as grocery bills, utilities, family loans, and your monthly income. This will give you an insight into whether it is feasible for you to pay off the debts you owe in your current position.

  1. Reduce Your Interest Rates

High interest rates can cause rapid growth in your debts, which could make it more difficult to repay the amounts you owe. You may be able to lower the interest rates on some of your debts. For example, with credit card debt, you may be able to ask the issuer for a lower rate or consider a balance transfer credit card.

  1. Pay Your Bills On Time

Paying all of your bills on time is one of the best things you can do for your debt and credit score. You can set up automatic payments or payments reminders through your provider to ensure you never miss a payment. If you are have trouble with managing your bills, a debt management plan may be able to help. This type of plan helps to reduce the number of payments you need to remember each month and while there are professional companies who can help you put one together, you can form one yourself and pay down debt, including:

  • Putting extra money towards the debt with the highest interest rate
  • Dealing with any debts in collections
  • Putting extra money towards the debt with the smallest balance
  1. Consider Consolidation

There are a variety of debt consolidation loans to get out of debt available, but each are designed to help you merge your debts into a single sum for simpler management. For example, with a credit card consolidation loan, you can combine the debts from multiple credit cards in a single loan to repay your outstanding balances. You will then owe the money back to the consolidation lender, rather than multiple lenders. You may also be able to find options for bad credit debt consolidation loans to help those in particularly difficult positions.

  1. Build Up An Emergency Fund

This should be done once you have paid off your debts, as the interests you get from savings won’t compare with the interest you pay on having debts. Instead of relying on credit cards or overdrafts, you should aim to start saving up straight away in preparation any eventuality. There are many phone apps available to help sweep spare bits of cash into savings accounts, like Chip and Plum. However, you can also make a conscious effort to move money from your current account to your savings each month. Making this habit will turn the process into an essential part of your routine.

  1. Seek Help If You Are Struggling To Cope

If you truly are finding it difficult to cope with your debts, there are a number of debt charities available that offer free advice and counselling, including StepChange, National Debtline, and the Citizens Advice Bureau. You can also find impartial help from the Money Advice Service. It is key to remember that you are not alone, and there are tools and resources available to you should you need them.

At Debt Consolidation Loans, we can help to consolidate your debts by providing loans to pay them off in full. By merging your debts together into a single loan, it may be simpler to manage your finances and you might find peace of mind in knowing your finances will be back on track. If you would like more information about our loans, please contact us and our friendly team will help.