Whatever debts you have, whether credit card balances, personal loans or any other credit product, then you should know how important it is to stay on top of the repayments and make them as agreed.
Not paying your debts on time can lead to financial problems and you can quickly find yourself with an increasing pile of unwanted debt.
Missing loan repayments can also have a negative impact on your credit report. If you continue to miss loan payments your lenders may issue default notices or even take you to court. Defaults and county court judgements can stay on your credit file for a long time and can affect your ability to borrow money in the future.
The best ways to clear debt and pay off your credit
If you are in debt, paying it off and being debt free might seem far away. But with a little knowhow and planning, you can get on the right track and be debt-free sooner than you think.
Budgeting is a tried and tested method and one that works. Make a list of all your income and expenditure each month and work out where you can make savings. Taking a packed lunch to work, or switching your energy to a cheaper provider can all help save money each month which you can then put towards paying off your loans and credit cards. The more you can pay today, the less interest your balances will attract and the less you have to pay in total – and the quicker your debts will be repaid.
Debt consolidation can also help you pay off your debt. A debt consolidation loan allows you to wrap up all of credit into one simple repayment. This helps simplify your finances and can save you money and accelerate the rate at which you are able to repay your loans.
By combining all of your small loans and credit card balances into one larger loan your debt consolidation loan may qualify for a lower interest rate, meaning that more of your monthly repayment will be going to reduce the amount you owe. Credit cards, for example, can attract rates approaching 30% per annum, meaning that if you just maintain the minimum payment each month you can take years to repay your balance. Debt consolidation can transfer these balances to a much lower rate loan where more of your payment goes towards reducing the balance and clearing the debt quickly.
If you are a home owner, you may qualify for an even lower rate on your debt consolidation loan if you are able to secure it against your home. As with any borrowing, you should be confident you can afford the repayments before taking out the loan.
The lower rate on your debt consolidation loan will mean that if you are able to maintain your current level of repayments each month you will rapidly repay your balance and really speed up the journey to debt freedom.
If you are struggling to keep up your current repayments, debt consolidation can help you reduce your monthly outgoings. Lower rates and possibly a longer term can save you hundreds of £’s a month, which can be used to pay household bills or build up savings – reducing the need for you to borrow again in the future and hopefully guaranteeing a debt free tomorrow.
Alternatively, if you have suffered a drastic reduction in income (for example as a result of unemployment), or simply cannot see a way to reduce your debt repayments to a manageable level, there are a number of things you can do now to reduce the stress of your financial problems and work for a debt free future.
First of all, you can talk to your creditors. If you are genuinely struggling to meet your repayments, they can help be, for example, reducing the rate of interest on your debt, or agreeing a period of reduced payments.