Debt Management Tips - Climbing Out Of The Red - Allay
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28 February 2018

Debt Management Tips – Climbing Out Of The Red

Debt Management Tips – Climbing Out Of The Red

When you find yourself in debt, we understand that it can feel like there is no escape. Trying to battle your way out doesn’t have to be done on your own as there are places to turn to for help and support, such as organisations like Citizens Advice.
Additionally there are steps you can take to make a debt-busting plan with the right guidance, from breaking bad habits to prioritising certain payments.

Whether you require expert input or are ready to tackle your finances head-on, in every situation, start by evaluating your debt, then follow our step-by-step guide designed to help you climb out of the red.

 

STEP 1: Evaluate Your Debts

We should start by saying that not all debt is ‘bad debt’. Taking out loans to purchase items like houses and cars are things that most of us will do at least once in our lifetimes, making monthly repayments until the loan is fully repaid. Ensuring payments are made on time and in full each month can actually be healthy for your credit score, however if they are continuously missed you risk the item being repossessed and debts mounting.

What is traditionally classed as ‘bad debt’ comes from regularly spending more than your monthly income. Over time this has more of an impact because it may mean you have to borrow money to stay afloat, which then leads to larger debts. This cycle can spiral out of control until you owe really large chunks of money with no end in sight.

Before you can get yourself back to a stable position you need to have a clear understanding of where your money has been going in comparison to your income, only then can you take the next steps to help clear your debt.

 

STEP 2: Seek Expert Advice And Help

If you don’t know where to begin or are really struggling, don’t be afraid to seek guidance. There are free advice and services which can help you, including debt counselors to support not just with finances but also your wellbeing, at a time which can be difficult to cope with. They can lead on negotiations with your creditors as well as create an effective debt management plan.

 

STEP 3: Restructure Your Debts 

Depending on your credit score you could shift some debts onto credit cards with lower interest rates, meaning you’ll pay back less. Some long-term credit cards can have 0% interest, which will really help to lower your monthly payments.

Once you’ve explored this and know exactly how much is owed, work out which debts need to be prioritised based on payment dates and interest rates, then pay them off first and stick to this plan. Focus on the biggest debts first as these will have more of an impact on your overall finances, but make sure you’re still able to pay the minimum monthly amounts on any other monthly repayments.

 

STEP 4: Streamline Your Spending

You will never be able to get out of the red without getting a handle on your spending and being able to stay disciplined. You should look to create a budget based on what you can feasibly live off, whilst still being able to make your repayments each month.

From this point, always try to pay your bills in full and on time, as the interest from late payments will only add to any existing debts.

 

STEP 5: Check What You Are Entitled To

In some cases you are entitled to help from the Government depending on your situation, from tax credits, benefits and other schemes to help. To find out if you are eligible check gov.uk

 

STEP 6: RECLAIM ANYTHING AND EVERYTHING

On any loans you’ve taken out you may have been mis-sold Payment Protection Insurance (PPI). This could mean that you paid back additional funds and are owed money back. A cash injection would really help with your debts, so it is worth investigating.

At Allay we are specialists in recovering mis-sold PPI. You will only need the details of your lender, date of birth and a recent address history to make your enquiry. You can even manage the whole process yourself using the Allay App, which you can download for free from the App Store on both Apple and Android. More information can be found here.

It isn’t just PPI that you can claim money back for. If you have ever been mis-sold products from payday loans to packaged bank accounts you could be entitled to a repayment, so find out more on our website.

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