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The UK is suffering from unprecedented levels of personal
debt. The consumer debt barrier broke the
£1,000,000,000,000 (£1 trillion) barrier in 2004.
How do so many people suffer such trouble over debt? Part
of the problem is that it is so easy to borrow. Also, high
property prices have led a large number of home owners to
take on more than they can handle.
There are many offers that seem too good to be true – and
they are. Some credit cards offer 0% interest rates but
only for a limited time and when that period has finished,
you end up paying an overly high rate.
Some people kid themselves that they are managing their
credit card debt by paying the minimum amount every month.
But with high interest rates, it can take years to pay off
a relatively small debt this way.
Also, store cards are more popular than ever but the
interest rates are very high unless the balance is paid
off within the interest-free period.
And because the Bank of England’s base rate of interest is
relatively low, many people assume that means debts are
more manageable. However, as inflation is also low, the
value of the debt does not decrease as quickly as in the
past.
And of course when debt starts to spiral out of control,
the first impulse is often to consolidate the various
arrears into one loan. While this can sometimes make debt
easier to manage and even offer a lower overall interest
rate, too often such loans serve as a green light to get
into more debt, offer unfavourable rates or do little to
deal with the root causes of the debt.
Your Debt Problem
First, it is important to be honest with yourself about
the nature and seriousness of your debt problem.
Don’t punish yourself – there are plenty of people in the
same situation or worse than you. The most important thing
is to take control of the problem and find solutions.
Don't go into denial over your debt. It won't go away if
you ignore it - it will only get much worse and further
out of control.
How bad has it got?
You can divide debt problems into two categories:
• Temporary debt problems
• Chronic debt problems
Temporary debt problems
Perhaps your problems are temporary and your income has
suffered because you are between jobs, are off work
because of sickness or temporary disability or you have
undergone some other momentary lapse in your income.
Maybe it is that you are struggling to keep control of all
your debts and missing payments but you don’t know what
steps to take to get organised before the problem gets
more serious.
The time to act is now before your problems become much
more serious and turn chronic.
You can consider the following courses of action:
• Economise
• Consolidate through a loan
• Consolidate through property remortgage
Chronic debt problems
Your debt problem is chronic if there is no prospect of
the balance between your income and spending becoming
positive enough for you to reduce your debts.
This may be because you have no hope of increasing your
income or of decreasing your spending by enough.
It could be that your problems have gone beyond those
described in ‘Temporary debt problems’ or
perhaps you are being threatened with court action.
Don't panic. You can still take control of the situation.
You have options and they are:
• Bankruptcy
• Sequestration
• Debt Management Programme
• Individual Voluntary Arrangement
• Protected Trust Deed
Whatever the state of your current debt situation, the best thing you can do is seek professional advice. Contact a reputable provider to see if you are able to solve your debt problem by consolidation.
Click here for free advice and a no-obligation quotation from one of the UK's most trusted debt consolidation companies.
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