How To Dig Your Way Out Of A Lot Of Debt

Many of us tell ourselves that we’ll never get into major debt, however a debt problem can develop more easily and faster than many of us realise. If you already don’t have much disposable income, adding a few debts to the equation could make it suddenly difficult to pay your bills. You may have no choice but to miss payments or take out extra loans to cover these, at which point you’ve entered a debt spiral. Fortunately, no matter how big the debt is, you can dig your way out. It will require some big changes to your spending habits, as well as potentially getting some third-party help. This post explains exactly how to dig your way out. 

Stop borrowing money
The first thing you need to do in order to get out of debt is to stop borrowing money. You may already be at a point where lenders no longer approve you, which can force you to stop borrowing. However, if this isn’t the case, you should avoid the temptation of continuing to borrow as you’ll only be adding to the problem. It may seem like you have no choice but to borrow money, but there are other options (as explained further on), so don’t borrow…

…unless you plan to consolidate
Consolidating debt can sometimes be worthwhile if you have many small debts that are becoming a headache. A consolidation loan is pretty much a large loan that you can use to pay off multiple loans. You then only have to focus on one debt payment per month instead of multiple debts payments, making it easier to track your debts. It could be particularly useful if multiple lenders are chasing you up. Just be wary that finding a consolidation loan lender that will approve you isn’t always easy - especially if you’ve got a poor credit score and lots of big debts. This post offers more tips on finding the right consolidation loan

Keep a monthly, weekly and daily budget
In order to start paying off your debts (and in order to avoid new debts), it could be important to start budgeting if you’re not already doing this. Start putting limits on exactly how much you can spend each month, each month and each day. Work out exactly how much you need to pay off your bills (including your debts) and then plan how to use the remaining amount. If after paying all your bills you don’t have much money left, it could be time to find ways of reducing your bills.

Talk to your creditors
Communicating with creditors can help you to get out of debt. If you’re financially struggling, you may be able to talk to lenders and negotiate smaller debt payments over a longer period, which may be more manageable each month. Next, you should consider bills like insurance and TV - is it possible to ring up a representative and negotiate lower rates? If you’re particularly struggling one month, some creditors may even be willing to temporarily freeze payments if you let them know in advance. All in all, it’s worth talking to your creditors and not just ignoring them until the bailiffs are at your door. 

Find ways of eliminating bills/large expenses
To make things more manageable each month, consider whether there are ways of eliminating entire bills - even if it’s just temporarily. Start with subscriptions that you don’t use or can do without such as gym subscriptions or streaming subscriptions. You should then consider regular expenses such as takeaway meals, alcohol or smoking - attempting to give some of these up for a month or two could be good for your health and it could save you money. Finally, for those that really want to get out of debt fast, consider whether it’s worth making big sacrifices such as taking your car off-road or downsizing. For most people, these measures won’t be practical, but for those that don’t use their car often or don’t need all the space in their home, they could be a viable solution.

Get professional debt advice
Everyone’s debts are unique. This is why it can often be useful getting personalised debt advice from a professional. FCA registered financial advisers may be able to help you work out the best way of dealing with your debts depending on your individual circumstances. This could be particularly worthwhile when dealing with large debts.