In today's financial climate, more people than ever are experiencing serious stress as a result of high debt repayment levels which can no longer be afforded because of changes in their financial circumstances. Lenders seem to tar the majority with the actions of a few and take the view that all borrowers are simply trying to avoid their responsibilities. The fact, nothing can be further from the truth, and most problems are caused through sickness, divorce, or redundancy/reduced working hours.
Debt Management can take various forms, but essentially it is a way of addressing debt worries by structuring debt repayments to a level that can be afforded within an individual's budget, having taken into account all other essential household living expenses.
Arrangements with creditors can be either formal, through Bankruptcy or Individual Voluntary Arrangements, which are formal, binding contracts, or informal through Debt Management Plans or bespoke arrangements to fit specific individual needs.
Once you have recognised that a problem exists, it is vital that proper advice is obtained regarding the right way forward, so don't put it off. There is help available if you recognise you have an issue, so make sure you get the right advice and support from organisations such as National Money Helpline.
To help avoid debt problems building up, here are five tips to bear in mind.
1. BudgetPut together a monthly budget to see where you are spending your money now, and what items have to be paid prioritise your commitments into ‘necessary' and ‘not so necessary'. What can you cut down without causing hardship?
2. List your DebtsList all of your outstanding debts how much you owe, monthly repayments required and whether or not these are secured or unsecured. Remember, secured debts need to be treated as priorities, as you could put your home at risk if the repayments are not maintained. A check of your credit file may help to ensure you have recorded all of your debts.
3. Speak to your CreditorsHaving compiled your budget, and factored in any savings in outgoings, discuss your situation with each of the lenders. Generally they try to be sympathetic if they feel you are doing your best and often will agree payment reductions to help you, at least on a temporary basis.
4. Seek Professional helpWhilst some people are happy to deal with their lenders directly, many feel this is a stressful process, and can be intimidated by such large institutions. In such situations, seek help from professional advisers like National Money Helpline. If the correct way forward is to negotiate payment reductions with your creditors, they will then represent your interests in arranging affordable payment plans. The Citizens' Advice Bureau can also be a good help and provide free advice.
5. Hold firm to your BudgetResist all attempts by lenders to press you for higher payments than you can afford and stick to the budget you have set for yourself!