How can I reduce my debt this year?

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In our recent survey, 40% of people admitted to wanting to reduce their existing debts. But how many people really know the best steps to take towards achieving this? Sometimes it can feel a bit overwhelming…

With this in mind, we’ve put together a few steps that may help you take control of your debts this year.

Calculate your debt total

If you have several loans and credit cards it’s easy to lose track of how much you owe. If you’re looking to reduce your debt, the first step you need to take is to calculate the total of your borrowings.

Start by creating a document which details all of your debts, across credit cards, store cards, unsecured and secured loans, overdraft and mortgage. As well as the amount, it’s also worth recording the interest rates and the lender each of your debts is with.

To find out how much you owe and what the rates are, speak to your lenders and check your loan statements. You can also use a credit report service, such as Noddle (Callcredit) or ClearScore (Equifax) who allow you to check your credit report for free. Within your credit report there will be information about your borrowing. Once you have started this document, it would be a good idea to update this regularly so you keep track of your debt.

Consider debt consolidation

If you are wanting to make your debts more manageable, you may benefit from consolidating your debts. A debt consolidation loan means grouping together all of your existing borrowing so that you make one single payment each month. This means you’ll no longer have different payments to different lenders, making life easier.

By combining all of your borrowing, you might also be able to access a lower interest rate which could mean a reduction in your overall debt. However, this isn’t always the case and sometimes consolidating can mean an increase in the total amount repayable.

In order to decide if a debt consolidation loan is for you, it’s worth doing the maths to work out if you would be better off. To check your eligibility for a debt consolidation loan, use a broker like Freedom Finance as they can search a range of lenders to find the best deal for your individual circumstances. To find out more about debt consolidation, visit: Debt Consolidation Loans.

Don’t be afraid to talk

If you are struggling to make your monthly payments, don’t suffer in silence. Missing a payment will have a negative impact on your credit rating. If you don’t think you can pay, speak to your lender straight away. You might be able to come to an agreement with your lender that makes your repayments affordable.

There are also several charities, such as the Money Advice Service that offer free, impartial advice for those who are struggling to manage their debts. To speak to someone about your debts, you can contact the Money Advice Service on 08001387777 or visit their website: Money Advice Service