MONEY MAKERS MAGAZINE

Being in debt can seem overwhelming. Spiralling interest costs and repayment demands only serve to increase the feeling of being swamped. But there are practical steps you can take to help you get out of debt:

Don't Bury Your Head in the Sand!
1. Make a complete list of all debts.
2. Work out a budget to see if you have any money left over for repayments.
3. Don't ignore repayment demands. Contact your creditors and explain your situation.
4. Do not borrow more money to repay existing debts. Consider ways of earning extra cash instead.

Prioritise Your Debts
Which debts you pay first should depend on the severity of action the creditor could take against you. Priority debts include mortgage arrears, rent arrears, council tax and fines. Lower priority debts include credit and store card arrears, bank overdrafts and hire purchase.

Switch to Get a Better Rate
With credit cards, mortgages and loans, check if you can switch and save. The bigger the debt, the bigger the likely benefit: remortgaging can save thousands of pounds.

Negotiating With Creditors
1. Explain clearly what you can pay and how often, and if you have priority debts that come first.
2. Be realistic about what you can afford. 'Token' offers as low as £1 a week may be acceptable.
3. Creditors may challenge your offer. Be prepared to provide proof of income and expenditure such as bills.
4. If creditors do not respond, start paying what you can afford anyway and seek help.

Where to Get Advice
Citizens Advice Bureaux offers help and arranges free legal advice.

The National Debtline gives free help and an information pack. For Wales and England, call 0808 808 4000. In Scotland, it's 0141 572 9273.

Debt Management Companies
You can consolidate debts and make just one payment a month. But the debt will then normally take longer to clear and cost more overall. Debt management companies deal with creditors on your behalf, drafting letters, etc. However this may also mean some loss of control. Many of these firms charge a monthly administration fee leaving you with less money to pay off your debts.