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.
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.
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.
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
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.
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.
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.