There’s More Than One Way to Conquer Problem Debt

There is no getting around it: Britain is on a borrowing binge, and credit card debt continues to climb. Alas, every binge is followed by a painful hangover, and if you’re suffering the agonies of problem debt, you’re not alone. Fortunately there is a cure for what ails you.

We’ve been spending like there’s no tomorrow

Christmas debt is the gift that keeps on giving, well into the following year in all too many cases. But in 2016 credit card debt hit a record high well in advance of the 2016 shopping season. Households in Britain hold a total of £66.2 billion in credit card debt as of December 2016, an increase of £571 million over the previous month.. This represents an increase in over the previous year of £1.4 million. Overall, unsecured consumer debt in 2016 had risen by 10.5 percent as of October, already the most significant growth since 2005. Taking into account the increases of the last quarter of 2016, this record is expected to surpass debt levels much further back.

Economists tell us that such an increase is a sign of a growing economy, spurred by ever-increasing consumer confidence. That’s the bright side of the picture. But the increasing debt burden on many households, combined with the inevitable rise in inflation in response to a weaker pound, represent a darker side. The growth that some economists are celebrating now is clearly unsustainable over the longer term. If consumers don’t begin slowing the increase in their debts, either the bankers will have to implement some form of affordability index in their debt approval process, or the country could be facing another credit bubble, waiting to burst.

What to do when repayment seems impossible

Concurrent with the increase in consumer debt is the increase in consumers who find themselves unable to meet their monthly payments. When repaying one’s debts becomes too difficult, some debtors are tempted to simply ignore the bills, then the warnings, and ultimately, the collection phone calls. This is a profound mistake, as those debts don’t just go away; they grow larger, and the efforts to collect the money owed become increasingly aggressive, ultimately deteriorating into potentially expensive civil litigation.

If you find yourself in this position, remember that pretending the problem doesn’t exist or going into a full-blown panic won’t help. You do have options, and by tackling the problem head-on, you can eventually work yourself out of the debt hole. But first, you need to know what those options are. You can start by talking to a debt advisor, or by researching charities such as the AgeUK Debt Advice web page, which has pretty comprehensive information on how to properly handle your debts, even after they’ve reached the problem stage. While the website is intended for and focused upon seniors, the debt advice they offer is for the most part universally applicable to all age groups.

But there are many people whose situation is not quite so desperate, and for whom some type of debt consolidation loan might be a better solution.

A juggling act that could rescue your finances

All too frequently, consumers take what appears on the surface to be the path of least resistance when making purchases or addressing a shortfall in meeting their monthly expenses, only to find that they have amassed more debt than they can pay according to the agreements they made. Those payments that seemed so easy to meet when looked at individually appear insurmountable when viewed in total.

One option you can exercise if you see yourself reaching such a state is to take out a loan large enough to cover your outstanding balances. Consolidation loan rates and terms from various providers are listed on this resource. he payments on such a loan can be significantly lower than the total of the payments on the debts being consolidated, especially if those debts carry high interest rates and fees, such as payday loans, credit card balances, and overdrafts.

Obviously, such a loan should be only large enough to cover the other higher interest or larger monthly payment debts to reduce your monthly payments. You might find yourself tempted to take out a larger loan, with enough over and above what you actually need so that you can make additional purchases. Doing this would only be perpetuating the same behaviour that got you onto a tight spot in the first place, and should be avoided at all costs.

Everyone’s situation is unique, and if you are in doubt about the best solution to your debt problem, discuss it with a qualified adviser. There are many options for getting out of debt, and it’s important that you make choices that will not only get you out of debt but will also help set you on the path to better management of your finances. But realise that the best time to start working to fix the problem is before you get behind on your payments.

Paul graduated in 2001 with a degree in Finance. Since then he has gone on to work for several of the UK's most well-known financial institutions.

An avid blogger and a huge football fan, Paul is here to guide you through the ins and outs of personal finance and perhaps save you some money in the process!

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