STRUGGLING with debt can be incredibly stressful, but there are a number of methods you can use to become debt free.
With energy bills forecasted to hit £3,600 this winter and inflation running rampant, paying off your debts can be difficult.
However, there are a number of methods you can use that could help you become debt free in a matter of months.
From snowballing to paying off your highest interest debt first, we list the best methods to use to help wipe your finances clean.
The Sun spoke to expert Jonathan Chesterman from debt charity StepChange.
Jonathan, the charity’s debt advice policy manager reveals the top tips you can use to help pay off your debts.
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Make a budget
Jonathan says this is the single most important thing you can do before dealing with your debts.
He said: “The first step when you’re dealing with debts is to understand how much money you have coming in and going out each month.
Make a budget to see if you can make any savings in other areas, so you’ll be able to pay more towards your debts.
There’s a number of useful tools online which can help you set up an easy budget. MoneySavingExpert.com offer a simple to use budget spreadsheet.
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Once you’re budget ready you’ll be able to visualise your debts.
It’s important to then identify whether any debts are attached to what Jonathan classes as ‘priority bills’ because the consequences of not paying them are greater than the consequences of not paying others.
Priority payments can include rent or mortgage, energy bills and government debt such as Council Tax.
Talk to your creditor
Talking to your creditor can help you better plan out how you’ll be expected to pay off your debts, but also when you can aim to pay them off.
Jonathan recommends talking to your creditors and said: “You might be able to negotiate a payment plan with your bank, or take advantage of a grant that can pay off some or all of a utility bill.
“Also, many creditors will agree to give you breathing space with a payment holiday while you sort out your finances. This is a temporary arrangement where they may freeze interest and charges for a short time”
Pay off highest interest debts first
Once you’re ready to begin the process of becoming debt free, there are many ways to pay back what you owe.
Some find merit in using the “debt snowball” method. Here one begins by paying off their smallest debts first.
Others may find the “avalanche method” more helpful. This method sees you pay off your highest debts first.
However, Jonathan said that your best start comes when paying off your highest interest-bearing debts first.
He said: “You may have to wait longer to fully clear some of your accounts, but it will be a cheaper and more efficient way to clear your debt in the long run.”
Get a balance transfer credit card
Some credit cards let you transfer the balance from another card.
Jonathan said: “Transferring a debt from a card with a high rate of interest to one with low or 0% interest may help you pay off the debt faster.”
For example, Sainsbury’s Bank currently offers a balance transfer credit card paying 0% interest for up to 34 months.
Santander closely follows by offering 0% interest on it’s balance transfer card for 33 months.
But low or 0% interest credit cards are hard to get if you don’t have a good credit rating. This may mean you can’t rely on balance transfers as a way to deal with your credit card debts.
Jonathan also warned that you should look out for fees when transferring a balance. Most credit card providers charge 2-3% of the amount you’re transferring as a one-off fee.
If you’re transferring a balance to take advantage of a lower interest rate, the fees may mean you save less than you expect so do your research.
What to do if you’re struggling with debt
If you are looking for general help and advice to help you manage your debt, there are a number of charities and organisations that may be able to help:
- National Debtline – 0808 808 4000. An adviser will ask you about your income and spending, so try and have as much information to hand as possible when you call. An adviser will help you work out what you can afford to repay, and help you decide on the best solution for your debt. Self-employed workers can also get help through Business Debtline.
- Step Change – 0800 138 1111. It can talk you through different options such as debt management plans (DMP), individual voluntary arrangements (IVA), bankruptcy, and debt relief orders (DRO) if they are appropriate.
- Citizens Advice – 0808 800 9060. Citizens Advice is a free and impartial service, and it can help you come up with a plan to getting on top of your debt including which payments to prioritise and how to reduce your living costs. The organisation’s website has a useful page with advice on many aspects of debt, but you can contact it for more personalised help.
Local organisations may also be able to provide support in your area.
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National Debtline also recommends contacting organisation such as Mind, Samaritans and Anxiety UK if debt worries are affecting your mental health.
A benefits calculator can help you work if you might be entitled to extra cash.
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