A solution to debts which is both temporary and terrible – a few minutes of searching for payday loans can place thousands of pounds in your account from multiple lenders, who can briefly provide a painkiller for the post-Christmas financial hangover.
But soon the demands and letters for the money appear, plus a hefty wedge of unmanageable interest. One card application pays off another, with another slice of interest on top. Once you’re trapped in that tangle of ‘robbing Peter to pay Paul’ life can become terrifying and confusing. Stark-looking letters can arrive through the post, uncomfortable phone calls can be made to your mobile, and you may even receive doorstep collectors. Even worse, as this guide to the loans system by Money Advice Service shows, you could lose your home on a secured loan.
It can appear that there’s no escape, but with a little foresight and shifting of existing money you can soon untangle yourself. Here’s the first thing to remember; creditors are legally not allowed to harass you or stalk you on social media, or place pressure on you to take out more loans to pay up. In fact, there are a whole host of things they can’t do as the Citizen’s Advice Bureau points out, but many people are unaware of them. Request to only receive correspondence through the post and make sure you open it; it won’t help you pay, but it will buy you a little breathing space.
The first step is to approach your bank and see if they can set up some form of payment arrangement where perhaps the amount per month is cut down, to be paid over a longer period. Consolidating a number of debts might save money by reducing interest rates, and it will also clarify your financial diary so you just have one date of payment to remember. A Debt Management Plan or Individual Voluntary Arrangement could be arranged by your creditors to help. The other alternative scenario is to swap bank accounts that may even pay you to change in vouchers and cash – here’s a recent guide from The Telegraph.
Rather than approaching outside sources to borrow money it might be worth swallowing your pride and asking a friend or family. Yes, it doesn’t feel good, but they shouldn’t charge you interest and you’ll be able to give yourself a stop-gap to move money about. But you must pay it back, and buy them a drink when things are better!
Build momentum throughout the year by cutting out the small items that you really don’t need, such as magazines, CDs and the like. In fact CDs and even clothes can be taken off your hands by companies such as Music Magpie, although you won’t get rich. Selling objects on eBay and other auction sites, or on Amazon, will soon clear your home and boost your wallet.
Take a look at your direct debits and bin any that are old, lapsed or unnecessary. There may be some that you miss such as those taken out quarterly or once a year. Then, once cancelled, swap the total amount over to paying off credit card debts – it’s better to do it immediately which will prevent you from forgetting and incurring more costs, and starting the process again.
Hit the price comparison sites for utility bills and insurance costs, and also learn the art of haggling. We’re not very good at it, but we can save a lot of money by simply asking companies for a lower price. It won’t work with council tax, but for example BT, Sky, Virgin Media and Talk Talk seem to be locked in a battle to supply their services. Why not give them a call and see if they can do you a better offer, or you may have to look for better options…
You might need a solid day of hitting the telephones and various websites, but it will be a day well spent if you have the burden of debts lifted from your shoulders to a more manageable value come spring and summer.