How to solve your debt problems

It is common for People to turn their backs on debt and before long they can find themselves in serious trouble, with their debt spiralling out of control.

If you find yourself in debt it is not too late to sort out, but it is important to remain calm and be honest about the amount you owe.

The majority of people use some form of credit, whether it's a mortgage, credit cards, overdrafts, loans, or purchases on finance.

When using credit there are certain rules you must follow in order to get the best benefits and avoid getting into trouble. The basic principle behind credit is that it allows you to purchase goods and services without having to pay for them until a later date. But there are things you must be aware of before using credit. If used improperly it can cause serious problems. Getting into debt is easy, but getting out of debt can be very difficult.

Start by going through all of your debts to find out exactly how much you owe and who you owe it to, as well as the monthly payments and interest costs. Now put these debts in order of importance, the most important being debts that entail serious action that can be taken against you if not paid back on time. These Priority debts are things such as mortgage repayments, rent, taxes and payments ordered by the courts. Serious implications will follow if these debts are not cleared.

The best way to manage your debt is by setting realistic goals that work for you. Here are some steps to keep in mind:

• Make a budget and stick to it. Calculate a realistic amount that you can afford to pay each creditor periodically.

• It may seem an obvious point to some, but one of the golden rules is never avoid creditors. Talk with your creditors and tell them your problems and your plans to repay. Your repayment plan MUST be feasible as you will be required to stick to it so don't make promises you are unable to keep.

• It's important to follow up a phone call with a letter confirming what you said and agreed.

• Consolidating debt into one manageable payment by use of a loan can be the answer in some cases, as you may be paying more interest than you need to and it can be difficult to keep on top of numerous payments to several creditors.

• Focus on all areas of your spending and spend time looking at ways in which you can save money. For instance, you may be paying over the odds for gas and electricity bills and by switching you could save money. Check out the Which4u Utility comparison page to find out how much you could save.

• As a last resort, you may have to think about taking legal action. The Wage Earner's Plan allows you to pay back debts through the courts. Straight bankruptcy cancels out almost all debt but this will seriously damage your credit history and is likely to reduce your options for future borrowing, so for this reason this should only be done if all other avenues have been explored.

There are several organisations that offer free, independent advice relating to debt problems, so you don't always need to pay for advice. The following organisations are just some of the places you can check out:

Citizens Advice Bureau

Your local Citizens Advice Bureau is a good place to start. They provide free information and advice on legal, money and other areas: your local Citizens Advice Bureau can be found in the phone book or on their website.

National Debtline

National Debtline offers free, confidential advice over the phone for people in the UK. You can contact them by calling their helpline and publications are also available to download from their website.

Consumer Credit Counselling Service

The CCCS also offers a helpline, that provides free, independent advice to people who seek help with debt problems.

local Authorites

Some local authorities offer free debt counselling. To find out if local authority provides this service check the website.