HOW TO... Get Out of Debt

If you don't want to transfer your debt on to another card, or you can't find one to suit you, you could consider converting the card debt into a personal loan. The rate of interest will in all likelihood be lower than you were paying on the card, but do be aware that payments will not be flexible. You will need to stick to a strict repayment schedule or you will start to incur penalties - which can be very expensive - and you will be damaging your credit record into the bargain. Avoid taking out expensive loan insurance if you switch your debt to a personal loan.

You now need to cut other aspects of your expenditure. This should be possible without cutting back too much, simply by switching to better deals.

0% Balance Transfer Cards

Switch your mortgage

For instance, if you have a mortgage, are you on the lender's standard variable rate? Could you get a better deal by shopping around?

Are you getting the best deal on your mortgage? Find out how much you could save right now!

Switch your utility and telephone suppliers

Make sure you are getting the best deal on your fuel. Make sure you are on the best tariff. Often you can get further concessions if you obtain your gas and electricity from the same supplier - a facility known as "dual fuel".

Paying too much for your gas or electricity? Find out how much you could save with a new supplier.

You can get further discounts by paying by direct debit and opting for paperless billing.

Consider switching to metered water if your consumption is low - likely if you live alone or are a couple with no children.

Check out bundled packages for television, broadband and telephone, to see if you can save money by switching. And, while you are at it, consider if you really need one of the more expensive packages. If you have financial problems, cutting down on some of the extras is a great idea.

Looking for better online access? Check your broadband options now.

Compare the cost of making phone calls, choose the best deal and switch. You could save up to 70% on your phone bill!

Now for some housekeeping

Reclaim money that is due to you

This could be anything from debts owed to you by family or friends, to tax overpayments and unfair bank charges and payment protection insurance premiums. If money is due to you, claim it back.

Claim government benefits and allowances and other concessions

Make sure you are claiming all the benefits and allowances due to you. These include concessions on council tax if you live alone, if someone in your family is disabled, or you are on a low income. Claim tax credits if you have children and are due them. Claim fare and entrance concessions and free prescriptions if you are entitled to them.

Don't put money aside for savings when you are paying interest on debt

The interest you are receiving in on savings will almost certainly be lower than the rate of interest you are paying out on loans, mortgages and credit cards. Worse, if you are working, savings interest will be taxed.

The best way to get your savings to work for you is by using it to pay off loans. There are, however, two provisos: make sure you have access to an emergency fund for urgent, unavoidable and unplanned purchases (this could be an authorised bank overdraft) and don't pay unnecessary early-repayment fees. If you want to pay off a loan early, work out what the early repayment penalty will be - if there is one - and see if it is worth paying it, compared with the interest you will save by ending the loan early. If you won't save any interest don't do it.

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Annie Shaw
04 February 2008 © Moneyextra.com

DEBT ADVICE - HELP WITH PROBLEM DEBTS - BALANCE TRANSFER - CREDIT CHECK - PERSONAL LOANS - SECURED LOANS - REFUSED CREDIT LOANS

Our senior editor Robin Amlôt recommends you should consider taking independent financial advice before acting on any article. Please contact us for help with your individual circumstances if any assistance is required.