Assess what kind of debt you’re in
Reviewing your finances will help you to assess whether you’re in a ‘debt crisis’ or whether you have large debts. A debt crisis is when you’re unable to pay your basic outgoings, such as rent. It’s not defined by how large your debts are, but your ability to keep on top of all your minimum payments.
Large debts: if you have large debts, you’ll need to keep on top of your minimum repayments and put together a plan to start paying off your debt. This can include consolidating your debt and negotiating your interest rates with your credit card provider.
Debt crisis: if you’re in a debt crisis and looking for advice, you can speak to a debt counselling agency such as National Debtline. They could place you on a debt management plan and negotiate with creditors to freeze interest rates on your behalf.
They may point you towards an IVA (individual voluntary arrangement), debt relief order or even bankruptcy. While this can write off a percentage of your debt, this is a decision that should not be taken lightly as it will impact your credit score.
If you’re in a debt crisis you may need to prioritise your debts by whichever has the biggest consequence if you miss a payment. For example, receiving a County Court Judgement (court order to pay money that you owe) or missing a payment on your mortgage could have a bigger consequence than a late payment charge on a credit card. If you’re in a debt crisis it’s best to seek advice from a debt agency.