Newspaper article Evening Gazette (Middlesbrough, England)

8 Simple Ways to Get out of Debt; AS PERSONAL DEBT HITS A NEW HIGH AND INTEREST RATES LOOK SET TO RISE, TRICIA PHILLIPS FINDS

Newspaper article Evening Gazette (Middlesbrough, England)

8 Simple Ways to Get out of Debt; AS PERSONAL DEBT HITS A NEW HIGH AND INTEREST RATES LOOK SET TO RISE, TRICIA PHILLIPS FINDS

Article excerpt

Byline: TRICIA PHILLIPS

WE NOW owe a record PS1.5trillion in debt - and that's before we take into account the spending on plastic over Christmas. Repayments are affordable now - but inflation is rising, pushing up the cost of everyday essentials, and the base rate is expected to start rising too, pushing up interest rates.

This could leave many people struggling to make ends meet and keep up with debt repayments.

Andrew Hagger of personal finance site Moneycomms.co.uk, says: "It makes sense to look at your outgoings right now to see if there is any way you can reduce some of your payments."

Don't wait until it's too late and you end up in spiralling debt - follow our eight-step plan to help you ditch that debt.

1 KNOW WHERE YOU STAND GET all your statements together - credit cards, loans, store cards, bank. How much do you owe on each, what are the monthly repayments and how much interest are you paying? Adding them up can be a sobering moment as many people never look at overall debt and what they pay each month to service it.

A BUDGET AND STICK TO IT LIST all income - salary, pension, 2Do benefits, interest on savings or investments - in one column. Then list essential bills - mortgage/rent, council tax, energy bills, fares to work and food. Add in every other outgoing - insurance to car tax, phone bills, TV package, holidays, clothing and birthdays.

Go through each and see if you can ditch any, cut back or switch to better deals. Work out what you have after paying bills so you can see what's left to pay off the debt.

Consider making extra cash by flogging stuff you don't use or need.

3 DON'T TACKLE IT ALL AT ONCE FOCUS on the debt with the highest interest rate as you will free up the most cash to get everything else paid off more quickly. Set up direct debits for other debt to ensure you pay at least the minimum each month and on time and don't get caught by late-payment fees.

4 TRY TO SWITCH EXPENSIVE DEBT THERE is more than PS63bn owed on credit cards in the UK, an average PS2,469 per household, according to the Money Charity.

If you have a PS2,000 balance on a credit card at a market average rate of 18.9% APR, and only make the minimum repayment of 2.5% each month, it will take 26 years to clear and cost you PS2,976 in interest.

Switch that balance to a 0% balance transfer deal, such as MBNA's 43-month card, and pay PS48 per month and you will clear the debt in the 43 months.

You'll pay a one-off 3.29% fee of PS65.80, but currently they give you PS20 off if you switch your balance within 60 days of taking out the card. So it will cost you just PS45.80 to clear the debt - saving PS2,930.20 in interest.

Andrew Hagger says: "If you're looking for a 0% balance transfer card don't automatically plump for the longest term as the balance transfer fee will be higher.

"Work out how long it will take you to clear your balance and pick a 0% card with a term that matches what you need. …

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