Dealing with debt

> Acknowledge the Problem

Situations can change drastically overnight; unforeseen events such as losing a job or a prolonged illness can turn what was once a manageable debt into a concrete problem you have to deal with right away.

> Take Control of Your Budget

Determine first the essential items on your budget and eliminate any unnecessary expenses. Depending on the extent of your debt you may have to make some sacrifices but it should be your priority to do what you can to keep things from getting worse. For free advice about budgeting, you can visit your local Citizens Advice Bureau for helpful information and support.

> Approach Your Creditors

If you find it difficult to keep up with your repayments despite re-organising your budget, the next step you should take is to approach your creditors. Don’t let it get to the point where they’re the ones approaching you because you’ve stopped making repayments altogether. It will help your case with your creditors significantly if you take the initiative in working out your debt. Despite the heavy-handed methods creditors can resort to at times, they will have to be sympathetic to your circumstances if you act first. Negotiate for a different repayment schedule with them if possible.
If you allow things to get worse by themselves, your lenders have to option to bring your debt to court and the possible harm this can do to your credit rating can be serious. You risk being turned down for loans you may need in the future, including credit cards and mortgages, and even if you do manage to arrange for a loan in such circumstances, you can expect to pay much higher interest rates.

> Keep Your Creditors Updated

Let your creditors know how your situation progresses, whether it improves or gets worse, so that a suitable course of action can be taken to handle your outstanding debt.
Whether your situation improves or takes a turn for the worse, let your lender know so that an appropriate course of action can be decided regarding your outstanding debt.

> Choose the Debt Management Company You Deal With

There are many different companies on the market that offer services for debt management and loan consolidation. Out of the hundreds of companies out there, you can sometimes run into problems or even feel that you’ve been given inappropriate or unsuitable advice. Report any issues you encounter to the Office of Fair Trading right away and find another debt management company that can better handle your problem before it gets worse.