Identifying debt problems

More and more people in the UK are finding themselves with high levels of debt that are very difficult to manage. For some people making ends meet can be tight but manageable, and although they may have to make cutbacks in terms of luxuries and non-essentials they can continue to keep up with repayments.

However, for others trying to manage debts becomes an impossible task that entails trying to find additional funds every month that simply aren’t available.

In order to identify whether you have a debt problem that needs to be addressed you need to sit down and work out your outgoings. You should write down every payment that goes out of your account each month, from overdraft interest charges to regular bills, direct debits, mortgage or rent, insurance premiums, loans, credit card repayments, etc.

You then need to calculate how much per month you need for essentials such as food, clothing, travel expenses, and the like. Once you have done this, add up the total and then compare it against your regular monthly income. If your outgoings seem to be higher than your incomes then you have a problem.

Depending on the deficit between you income and outgoings you may be able to sort out the problem without reducing the amount that you repay on your debts by making other cutbacks. However if the deficit amount is quite significant, trying to find a substantial amount of additional income each month may prove a problem.

Making cutbacks on your bills or rent/mortgage is not an option otherwise you will find yourself without utilities or even without a roof over your head. In these circumstances you need to look at your financial commitments in terms of unsecured loans and credit to see whether any cutbacks can be made there.

One important thing to remember is that you should not simply decide that you are going to start paying less than the amount required on your loan or credit card and change your repayments.

This is something that needs to be addressed via your creditors, and you can do this yourself or though a professional debt management or consumer credit counselling agency.

Most creditors are understanding about financial issues, and with prior arrangement will accept a reduction in monthly repayments (within reason).

There are actually a number of options available to those suffering financial difficulties as a result of high levels of debt, and different solutions will suit different sets of circumstances. The level of debt that you are in, the amount of your income and outgoings, and your employment and personal circumstances will go some way towards determining which route is best for you.

Those that own their own homes may find that a secured loan is the perfect option to enable them to pay off their smaller, higher interest debts whilst reducing outgoings. For those without their own home some of the options include an unsecured consolidation loan, an informal agreement to reduce repayments with creditors, a repayment plan through a debt management agency, or even an IVA.