Debt is a very hungry species of financial animal, and it will often consume all of the money you give to it, and still demand more. Getting into debt is very easy, made only easier by the availability of loans and credit cards. In a consumer society, it can make sense to purchase what you need through the credit card, and then pay for it later, even in times of extreme financial crisis, but this can be a bad idea, as these types of debts mount up very quickly. Even if you are tempted to go into debt in order to buy presents or gifts for family, you could end up in severe financial trouble.
Solving your financial crisis will never be easy, and you may already be suffering the stress of having to pay back money that you owe. Taking out a loan to help you cover all of your debts at once can be one solution, and if you feel that you will have the money in a few weeks, you can even try to take out a fast payday loan to quickly give you the funds to cover credit card bills or loan repayments. In order to take a long-term hold of your finances, however, you will need to manage your finances.
Start by working out your current credit status. You might want to consider having a credit report done. This will tell you exactly where you stand, including whether you have a higher than average debt ratio, or if you are unlikely to be offered any kind of new loan while your debts are in such bad shape. Paying back debts is one way to improve your credit score, so it is a good idea to re-check your credit rating every few months once you have a debt plan.
Speak to the company that you owe money to. They will be able to offer you a financial solution to your problems. They do not want you to go into bankruptcy, as this would deprive them of your finances. It is always better to talk to your bank or credit card company before you decide not to pay that monthly bill.
Look at the fees you are paying for your loan or credit card, and consider whether you will be able to move to another service. Changing credit cards can help you to get a lower interest rate, and if you still have a reasonable credit rating, then you could also find ones with a suitable balance transfer window, which will allow you to get the most out of your credit card use.
If you have store cards or premium cards, now is the time to get rid of them. These cards often carry high rates of interest for your debt, eating up your money. It is far better to pay these off first, and then look around for other types of credit. If you have to take out a loan to finish the card for good, then it might be worth it: the interest rate on the loan is likely to be lower.
Could changing bank account help your debt?
Most people in the UK hold some kind of personal bank account, particularly current accounts, and it is often said that the British public are more likely to get divorced than change their bank account. This is almost certainly due to the number of barriers which banks throw up around their accounts, making it difficult for people to change. Recent comments by MPs on the Treasury Select Committee have suggested that the big 5 banks, Lloyds, HSBC, the Royal Bank of Scotland, Santander and Barclays, have too much control over the current account market, and you may feel that your own bank has taken serious advantage of this. You may be interested in getting out of bed with your present bank, and changing to a new partner.
Changing your bank account to one offering a better deal can be a good way of saving money, and switching in the current financial climate can certainly help you beat the fees. In order to leave your bank, you should start by looking at the offers other banks are making. Different rates of interest might appeal, or perhaps lower overdraft charges. If your current bank account doesn’t pay any interest when you have credit, change to another that does. Some banks will even offer you money to transfer to their current account, although you will have to meet certain requirements.
Once you have found the right current account for your situation, you might choose to take advantage of your bank’s “switching service”, which will allow you to move your bank account. There are certain risks with using this service, including the possibility that payments may “go astray”, or be lost in the system. This can have negative effects, both for direct debit payments, and for money coming into your account.
You may also consider going into the bank that you want to start the account with, and requesting a change. Take with you details of your current bank, all the accounts you hold there, and evidence of your name and address (this will usually need to be a driving license, passport, or other formal methods of identification).
Your new bank should offer you an interest-free overdraft while the switching process is going on. This is to make sure that your payments go through while you are waiting for your new account to be set up. This will ensure that all of your standing orders and direct debits are paid into the account properly, rather than being returned.
Some sound advice
You will also need to make certain that the people paying money into your account know that you have changed banks. Your employer, the credit or pension divisions of the government and any ISA or stock portfolios which you hold outside the bank will all need to be informed of the change.
While the transfer is being made, and for the next few months afterwards, you will need to carefully monitor your accounts. If you use the internet, then check your bank statements every day for the first month, and then every other day in the following two months. Look out for returned direct debits, or payments which have not been made correctly. If you notice any of these errors, you will need to speak to your bank immediately.