Despite recent news reports that consumers are reluctant to take on new debts through overdrafts and unsecured lending, the financial situation for many households remains strained. The average consumer is expected to make a number of repayments each month with these expenditures sometimes exceeding the amount of money which is received through income.
Overall, the number of people taking overdrafts and unsecured loans fell by 7.7% in the last year – according to the British Bankers Association (BBA) – this shows a real desire by the population to bring their debts under control, but the secret to efficient debt management entails far more than simply avoiding unnecessary borrowing.
For those who are plagued by a large number of regular repayments, keeping track of what is still outstanding can be difficult. In these situations, debt consolidation is the obvious option.
This allows you to take all of your individual debts and turn them into a single payment. This makes it far easier to track what you need to pay each month, making budgeting a far easier process.
2. Suitable products
For those in debt, avoiding borrowing is not always a viable option. Instead, making sure you only borrow through suitable products is the best course of action. Only borrow money when you need to and remember to look for specific products such as a consolidation bad credit loan. This is a product specifically designed to help those with a poor credit rating – something those in debt may be more likely to have.
3. Savings & sensible expenditure
As it is not always possible to increase your income in order to cover the expenditures you have, cutting back on what you spend is important. This doesn’t have to equate to sacrificing the things you want or need but simply means taking a more cautious approach towards spending. Begin by reviewing regular outgoings, such as those for utility bills and other amenities, and then use a price comparison site to see if you could benefit from changing tariffs or suppliers. Also, think twice about spending on any unnecessary luxuries for a while, just to give your finances a chance to recover.
4. Improve your credit
A lot of people that have a high ratio of debt to income are likely suffer from a poor credit rating. Sometimes this is inevitable if you are struggling to make all your payments regularly and on time. Whilst this may not be your biggest concern whilst making repayments, it can cause problems when you attempt to obtain credit in the future. Keeping rigidly to a structured repayment schedule will help you meet financial commitments and thus improve your credit rating.
One option is to roll up all your repayments into a single loan that allows you to make just one repayment a month. It is important that you seek appropriate products such as unsecured loans for people with bad credit which will usually allow you to spread your repayments over a longer term thereby lowering the repayment amount to make them easier to repay.
5. Review you bank account
Lastly, if you find that you are regularly charged by your bank for using an overdraft, consider moving your bank account to a bank that provides an account that does not allow overdrafts. The bank account from Secure Trust Bank is an ideal product for people that need a bank account that gives better money management facilities. Available to all UK residents, there are no credit checks to open their account and it comes with a pre-paid Mastercard debit card. They call it ‘Jam Jar’ banking and it allows you to hold your fixed monthly outgoings in one part of your account and only spend your disposable income by transferring it across to your debt card.
Financial Excellence note: Readers, what are your thoughts about consolidating debt? What about improving your credit? Are there times when building credit is important enough to justify taking on some debt?