Debt is something that many of us have become accustomed to living with over the years. Whether you have long-standing student loans to pay off, hire purchases, or accumulated credit card debt, this short guide will help you to manage the money you owe and explore your options. 

In the wake of the Coronavirus pandemic, reports of a steep rise in emergency borrowing have prompted fears of an emerging debt crisis. 

(Image: BBC)

Before the arrival of COVID-19, debt in the UK stood at £120 billion, largely consisting of personal loans, student loans, hire purchases and credit card debts. With more of us looking at financial hardship in the wake of the pandemic, let’s take a deeper look into seven ways you can manage your debt – whatever it may be:

Assess Your Spending

Although it may seem obvious to point out, the most significant first step to take is to assess your outgoings. Keep a diary – either a mental one or a physical one – and take note of your recurring purchases. This can really help when it comes to realising what your unnecessary purchases are. 

For instance, have you found that you’re buying lunch at work on a daily basis? Are you taking taxis where you could use public transport? These sorts of substitutable changes may amount to small savings here and there, but it soon adds up. 

Going for runs rather than paying for the gym, or buying instant coffee instead of visiting a barista could make the world of difference at the end of each month. 

Make Yourself a Budget

Budgeting can be an excellent way of managing your outgoings and incomings to ensure that your debt is best catered to. Money Advice Service offers an online budget planner that can help individuals to work out where their money’s going each month and calculate what will be leftover once bills have been paid. 

By budgeting and reassessing your outgoings, you can come up with a figure that can go towards monthly debt repayments. 

Create a Bill Payment Calendar

Use a bill payment calendar to help work out which bills can be paid each month. This tool can be great for logging each bill’s payment amount alongside its due date and seeing how each outgoing can be addressed. 

If, for instance, you get paid on the 27th day of each month, you can use the same calendar each month, or if the dates fall on different days simply create a new one each month. 

Prioritise Urgent Debts

Always look to prioritise the payment of urgent debts first. Although you may be able to clear a bunch of small debts in one fell swoop, the impact of being unable to pay off a large debt could be more damaging for your home or possessions. 

You may need to get in touch with priority creditors quickly if your situation is more urgent, like if you’re in danger of being evicted. Let them know you’re seeking debt advice so you’re looking to find a way forward.

Consider a Consolidation Loan

Debt consolidation loans can allow you to merge your different debts into one loan – typically lowering your monthly repayments and meaning that your debt can be rolled into paying back one single lender. 

However, if you’re having trouble managing current debts, it’s worth taking a moment to consider that you could also have issues keeping up with repayments on the new loan. Be sure to take debt advice before making a decision to compile your debts into one loan. Consult a debt advice organisation to check out the viability of a consolidation loan before taking your next steps. 

Look Into Taking Out an IVA

An Individual Voluntary Agreement could be a viable option if your debts total £5,000 or more. IVAs come somewhere in between debt consolidation loans and a bankruptcy order, and can be useful for individuals who find themselves in severe debt that they’re struggling to tackle with their income. 

In taking out an IVA, you can gain the support of an Insolvency Practitioner and won’t be forced to sell off your home to pay your debt – although may be liable to release some equity in certain cases. However, an IVA will also be reflected in your credit rating over the short term. 

You Still Have Options if You Can’t Pay Your Debts

If your debts seem like they’re insurmountable, don’t worry, you’ll always have options available, even if you feel like you’re stuck in an avalanche of repayments. 

If you don’t have the money to pay off your debts and have no assets left to sell, you could apply for a Debt Relief Order or Bankruptcy Order to write-off the money owed. While this comes with significant constraints to your credit status for the future, it can help to pave the way for a fresh start – however, Bankruptcy Orders in particular should only be turned to as a last resort. 

It’s worth remembering that no matter how bad your debt becomes, there will always be someone to talk to and share your problems with. Talking to family and friends about your problems won’t make them go away, but it can help to help you deal with your debt and could even offer you a fresh perspective on steps to take. If things feel like they’re getting on top of you, there’s also plenty of professional support out there. Remember that it’s never worth suffering in silence. 

A bit about me: Dmytro is a CEO at Solvid. Founder of Pridicto. His work has been published in Shopify, IBM, Entrepreneur, BuzzSumo, Campaign Monitor and Tech Radar.