Avoid sleepwalking into debt

The trigger can be simple: a broken washing machine, a family emergency, spare parts for the car. Increasingly, the answer for many is a payday loan for a few hundred pounds to tide them over for a couple of weeks.

But with inflation at more than five per cent and average pay rises lagging well behind – at a record low of one per cent – people on low incomes have been joined by the well-paid middle classes. Research by IRN (Information Research Network) for consumer champion Consumer Focus found that 33 per cent of payday loan customers across the UK actually earn between the national average wage of £25,000 and £50,000.

The benefits are simple; it's almost instant money for anyone with a job and a pay slip, with no need to argue about overdraft limits or take out a new credit card. The downside is that interest charges can be very high – the equivalent APR can top 4,000 per cent if you don't repay what you owe almost immediately.

If you're finding it increasingly difficult to make ends meet, the following steps might prove useful:

1.Admit you've got a problem: the statistics show you aren't alone, so tell family, friends or whoever may be affected that money's tight. Then you can start cutting back on spending.

2.Try to trim your living expenses: trade down: swap premium brands for own brands, check out the local market, hunt for clothes in charity shops (they're vintage, not second-hand these days), have an evening with a borrowed DVD instead of a night at the cinema. Maybe walk or cycle instead of driving or taking public transport.

3.Face up to your credit repayments: they can be a significant expense, so get on top of them. Start by looking at your credit report. It will show you where the money's going, how well you are coping and whether there's anything that can go. You can see your Experian credit report for free with a 30-day trial of CreditExpert (New customers only. Monthly fee applies after free trial).

4.Go through your last year's bank statements: daunting but worth it. Look for direct debits you no longer need, such as magazine or club subscriptions and cancel them. Scrutinise regular payments and dump any you can do without.

5.Get better deals: the key is improving your credit status, to enable you to qualify for less expensive lending. Go back to your credit report (checking it yourself won't affect your credit score) and ask the relevant lender to correct any errors or discrepancies. Register to vote at your current address and close joint accounts held with a previous partner, as you could be penalised if he or she has money troubles.

6.Make your repayments on time, every time: if you can't, contact the lender immediately and explain that you have a temporary shortfall. Something as simple as shifting the repayment date to the day after you're paid could make a real difference, or you may be able to reschedule your repayments so you pay less each month over a longer period.

7.Target your most expensive debts: the less you have to pay in interest, the further your pay will go. If you have any savings, use them. They're there for a rainy day and this is it. If not, try to repay more than the bare minimum each month, so you're eroding your debt rather than prolonging it.

8.Get expert advice without paying a penny: there's plenty of help online. Take advantage of the information and insights at www.creditexpert.co.uk during your free trial. You could also look at Citizens Advice, National Debtline or the Consumer Credit Counselling Service. If you need to talk to someone in person, get in the queue for an appointment as soon as possible.


Experian Credit Expert: A monthly fee of £14.99 applies after your free trial. You may cancel during your 30-day free trial without charge. New customers only. Free trial period starts on registration - further ID verification may be required to access full service which may take up to 5 days.


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