Dealing with debt? You’re all set.

First step to manage debt: don’t panic!

We know how it is. One minute everything’s just fine. Next minute, everything’s a bit of a struggle. And that’s because debt can be sneaky. Turn your back or lose track, however briefly, and suddenly ‘manageable’ becomes ‘mountain’.

Sometimes all it takes is a little change — an extra-large bill you weren’t expecting, or a car giving up the ghost. Sometimes it’s a big change, like losing a job or gaining a dependent. And sometimes (let’s be honest, it’s not unusual) it just adds up without you even noticing.

Sound familiar? Course it does! It happens to most people at one point or another. But here’s the thing. The number one rule for dealing with debt. Don’t panic. A few simple steps could be all you need to get back on track. And, because we’re good that way, we’ve pulled them all together into this super-handy debt management guide.

Clear debt like a boss

The most important thing to remember right now is that you’re in charge. You are in control. It’s easy to forget, because debt can be scary and it can feel easier to ignore it. But don’t let it bully you. Come at it head on and you might be surprised at how quickly it backs down.

Here’s your first three steps towards managing debt like a boss:

• Take some time out. Gather all the info you have about what you owe. Now take a deep breath and make a list of every single creditor. Write down how much you owe, how much you pay and when you pay it. Think about interest rates and payment terms too — how long are you going to be making these payments for? 
• Step two: next, work out your budget. That means everything that comes in — including income from investments, benefits, child maintenance and so on — and everything that goes out. Mortgage or rent. Bills. Groceries. Child support. Even your TV licence.
• Step three: rank your debts. What’s most important? Your mortgage or rent is usually top priority. If you don’t pay your mortgage or rent, you could lose your home.
• Step four: look at ways to reduce any repayments or pay off a credit or store card to reduce the overall interest you owe. Think about each debt and write down realistic ways you could work with the creditor to manage the repayments.

Small changes, big difference

So we know how much is coming in, and how much is going out. What’s left is what you can use to pay off debt. Not enough? Okay, let’s make some savings. Switch to a cheaper supermarket. Buy a travel mug — it’ll pay for itself in two coffees. Suspend memberships for a while. Review your telly channels. You’re going to be surprised at how much even small changes can make to your budget.

Use your savings

There’s no point in having savings when you’re struggling with debt. So if you can use them — or the money in your current account — to pay anything in full, it could make everything else easier. You don’t have to use the full amount. No-one’s saying you need to clear everything in one go. But if you can take away just one or two monthly payments, how much difference might that make towards becoming debt free?

Get it together

It might be worthwhile looking at a debt consolidation loan. In other words, now that you know the whole story in terms of what you owe, would it be easier or cheaper to combine it all into one loan, with one monthly payment? But don’t rush in. It might not be your best option. You need to think about:

• Checking your credit rating. It might affect the kind of loan you can apply for, as well as the amount of interest that comes with it.
• Interest. Make sure you’ve calculated the amount of interest you’re paying properly, accurately. If you’re going to end up paying more on a new loan, there’s no point in progressing.
• How much you need. Don’t be tempted to borrow more than that. We’re trying to pay off debt here, not add to it.

Speak up

Get some expert debt advice

If you feel like things have got so bad that you can’t sort them out for yourself, rule number one still applies. Don’t panic. Get some solid debt advice instead.

You can always talk to us (or whoever your lender is). We absolutely understand that people aren’t perfect, and that sometimes finances can get out of control. If you’d rather speak to someone independent, there’s great free, confidential support from organisations like StepChange, the Citizens Advice Bureau or National Debtline.

The important thing here is to speak to someone. You don’t have to do this by yourself.

Talk to your creditors

There’s one other set of people you really need to talk to — and that’s the folks you owe money to. You won’t be the first person to do it and you certainly won’t be the last. They’re used to helping people manage what they owe, so they’re in a great place to help you too. But don’t leave it too long. The sooner you speak to them, the sooner you can agree a new plan, put it in writing and stop stressing. Sounds good, doesn’t it?

This should get you well on your way to making those debts history. However, if you are an existing loans customer or are curious about loan repayments feel free to use our Loans calculator to see how much you could consolidate your payments to.