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It seems that many people's borrowing habits are rapidly spiralling out of control
and could be leading towards, if they haven't already, what has been
described as a 'personal debt crisis'. It's hardly a recent development;
this problem has been building for many years.
Further indications of the escalating personal debt crisis are there for all
to see in recent figures on personal debt: it would appear that this is not a
problem that shows any sign of slowing down.
Don't despair though, on a personal level bad debt is not inevitable and with a
slightly more money savvy, disciplined approach to managing your money you
should be able to keep things under control. Here are some simple ideas to
help you avoid debts spiralling.
If you haven't got the money don't spend it
It
might sound obvious but if you stick to this one simple rule then there's
really no reason why debt should become a serious problem.
Be
disciplined with debt repayments
If you're efficient at paying off outstanding debt before it has a chance to
accumulate serious amounts of interest then you should stay well on top of
your debts. Of course, if we're talking credit
cards the most effective measure is to pay off your debt in full
every month but, realistically, this might not be feasible for everyone.
Keep in mind that minimum payments, the smallest monthly amount you can
pay without being charged, might seem convenient but won't get you any
closer to eliminating your debt because the minimum payment will decrease
in line with your balance. If you can't afford to pay off your debt in
full set your monthly payment at a fixed monthly amount rather than fall
in line with the minimum payment system - remember it's designed by banks
to keep you permanently in debt.
Transfer
your balance
An easy method of stopping your credit card debt spiralling out of control is
by transferring your balance to a 0% card. There are loads out there, just
look for the longest 0% balance transfer period. You can keep up to
date with these things by consulting an online comparison site. The one
thing to remember if you're doing this is not
to use this card to buy anything. The likelihood is that it won't have a
purchase rate that is anything like as competitive as the balance transfer
rate.
Don't take out a store card
These are generally sold by tempting shoppers with short term store discounts,
don't fall for it! Whatever
the discount the store offers you on the day, remember, it won't be as a
gesture of goodwill. Nearly all store cards carry a vastly inflated rate
of interest and they rely on you paying off the balance in full straight
away.
Make sure you can afford your loan
If you're taking out a loan be careful not to overstretch your finances. Look
carefully at your monthly income and outgoings and asses realistically
what you can afford to pay each month. As long as you budget carefully and
don't borrow more than you can comfortably afford to pay back then there
no reason not to consider an unsecured loan. In fact with rates
historically low at the moment now could be a good time to borrow.
You would be well advised however to first check one of our loan calculators.
This should give you a good idea of what you'd be paying every month.
Do you really need it?
It's easy to spend a little extra on clothes, food and drink and presents. However, if you make a list of what you need
and stick to it, you're likely to save yourself more money this way than if you went out impulse shopping.
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