Managing your debt

Being in debt costs money. The more you owe, the more interest and other charges you pay. That’s why minimising debt as much as you can is essential for your financial wellbeing.

You can be in debt but still be financially healthy. Many people have unavoidable debt like a mortgage or car finance. The key to debt is only borrowing what you can afford to pay back and avoid excessive borrowing.

This is taking on any debt that you can’t comfortably manage. Look out for these signs: 

1. Borrowing to cover everyday expenses 

One of the first signs that you have a debt problem is if you don’t have money to cover costs like food and bills. Rather take out a short-term or payday loan, and try to reduce your spending. 

2. Repeated borrowing

If you have to borrow money repeatedly and regularly, you may have a debt problem. Set yourself a budget and stick to it, so you can plan ahead to meet your expenses. 

3. Minimum payments

Another sign of excessive borrowing is if you have more than one credit card or can only afford to make the minimum required monthly payment. 

4. Cash advances

Using cash advances from credit cards to pay bills could seem like a manageable solution in the short term, but it’s another sign that you’ve borrowed more money than you can comfortably afford to pay back. 

It’s difficult to avoid borrowing, especially if you’re struggling to cover your monthly costs. Explore the following options to improve your debt situation. 

1. Cut back

Many people struggle with debt after buying things they want but can’t afford. This can be anything from a big house to a daily meal at a restaurant. If this sounds like you, think of ways to reduce your spending.

2. Talk to your lender

You may feel worried at the thought of opening up to your bank, but in many cases, they can offer you help and a way forward. This could include a short payment holiday, freezing the interest on your borrowing for a while, or amending the terms or interest rate that you’re paying.

3. Consolidate your debts

If you have multiple debts, it may be cheaper to combine these into one loan if it means paying a lower interest rate. Consider the fees and costs associated with repaying or consolidating your loans, and whether you could pay less overall.

If you feel like your debt is getting out of control, consider seeking specialist help from a free debt charity or related organisation.