Leave debt behind in 2013
Although debt charity Credit Action’s headline personal debt figures show and increase nationwide, hidden among the gloom is the news that the value of outstanding unsecured loans dropped by £3billion in the twelve months to December 2012.
That may represent a relative drop in the ocean when considering the British public’s £157billion unsecured debt but it is at least a sign that the public are, in part, getting their spending under control and freeing themselves from sometimes-punitive interest payments.
If you are in debt, you don’t need us to tell you of the stresses it brings and the difficulty of extracting yourself from it. But you might be more interested in finding out ways you can say goodbye to debt this year, and so all you can to continue the downward trend in unsecured debt by December 2013.
Manage your debt with a balance transfer card
A balance transfer works by transferring your pre-existing debt from one card to another. In so doing, your debt is transferred from an account where interest rates are high to one where they are low or, often, temporarily standing at 0%.
Credit cards can be very effective at getting people into debt, but the 0% balance transfer is a very effective way of managing debt once you have it. The key is to know how long the 0% rate is in effect for and ensure you have repaid the debt by the time you reach that point.
Paying off credit card debt on time also helps build your credit rating, which in turn allows you access to more and better finance options, which can often, again, come with preferential interest-free periods and lower rates in general.
Avoid short-term lenders
This is a slippery slope to perhaps going bankrupt. If you need cash to tide you over until payday, don’t be tempted by short-term lenders.
One look at the interest rates your debt will be subject to over the period of a year and you will see just why payday loans are a potential disaster. Loans of less than £100 can spiral out of control if not repaid quickly.
If you need a loan to help fund a necessary purchase or to consolidate debt, you are far better off looking into a longer-term personal loan where the APR (annual percentage rate) is are 15% than a short-term loan with an APR of 4,000%!
Get serious about budgeting
One evening with a calculator and your weekly bills could be the difference between going debt-free and remaining in the mire. By working out your weekly and monthly outgoings, and comparing that against your income, you will be able to build a budget that will see you lessen your debt in a sustainable manner.
The secret to budgeting is to pay attention to detail – if you can expect to pay for it in the week or month, make sure it’s included – and not be too austere. Don’t ban treats like cinema trips or tickets to the football is they are important to you.
That said, understand that cutting your cloth accordingly for a year could make the difference between feeling guilty for those little self-indulgences and being able to treat yourself safe in the knowledge that your finances can take it.