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Debt Management Advice

Many of us have been making the most of historically low interest rates to borrow money and to rack up debt on our credit cards. Our level of collective debt is unprecedented. It's reckoned that around an average 12 per cent of our income is eaten up by servicing debts.

And that figure is based on current interest rate levels. How would we cope if our bills suddenly went up by 20 per cent? It only takes interest rates to rise a few percentage points and it could happen.

Part of the trouble is that the older of us have forgotten the years of double-digit rates, and the younger of us have no real experience of the cost of borrowing rearing up. OK, we can bang on about how the credit card providers should be more responsible about unsecured lending. We can criticise them for setting low minimum repayments which can tempt customers to repay little more than the interest on the amount owed and so never pay off the debt. Ultimately, though, we are the ones who have to dig our way out of the debt hole. Waiting for a lottery win, or for a bequest from a distant relative, is no strategy.

Techniques for getting out of debt

Stop the rot. If you have multiple credit cards, identify which one has the most draconian interest rate and shred it. Don't tuck it in a drawer and rely on your willpower not to use it. History suggests this is not a great tactic. If you can, consider transferring the debt on this card to the one carrying least interest.
Talk to your creditors. Let them know you're having problems. Depending on the extent of your debt, you may want to agree a strategy for clearing the debt. Work out how much you can realistically afford to pay. Focus on the most important monthly payments - mortgage/rent, council tax, gas, electricity, etc.
Don't panic but don't ignore the problem. You may have seen nature programmes where creatures stay very, very still in order to evade predators. Your debt won't go away; in fact, ignoring it guarantees that it will get worse as the interest builds up and your creditors start to hound you. Don't ignore court papers.
Don't pay for advice. There are plenty of sources of free help and counselling. Talk to your bank, ask your employer for advice, try the Citizens' Advice Bureau.

Getting into severe debt is horrible - I know, I've been there (it happens when you write for a living!). The crucial first step back to solvency is to face up to the fact that you're in debt and to recognise that you need to adopt a conscious strategy to get out of it.


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