Reduce Your Debts

A guide to dealing with and reducing your debts

This detailed guide from the debt advice team gives you some ideas on how you can reduce your personal debt.  Debt is a fact of life.  No matter what day of the week it is, chances are that you owe money to somebody somewhere in the world.  In fact, chances are that you owe a lot of money to a lot of people at any given time.  If you need help at any time please call 0800 074 6918 to speak to a member of the debt advice team.

Tips to reduce debts and save money

There are many simple ways to make significant savings on your regular spending that could reduce or even clear debt.

• Change your mortgage
  Loyalty to your bank benefits your bank, not you,  so always be on the lookout for a cheaper deal.
• Clear your credit card debt
  Always clear your most expensive debts first, in other words your credit cards and store cards.
• Cut down on fuel bill and telephone bill expenditure
  Fuel prices are rising so consider changing to a new supplier. You should also consider installing a water meter.
• Cut down on mobile phone costs
  Consider a pay-as-you go mobile and cut out the need for a monthly line rental.
• Consider going to the market or car boot sales?
  Markets are cheaper than the high street for food and clothing so lookout for them in your local paper.
• Consider own-brand goods
  Just because the goods don’t have an well known brand name doesn’t mean they are bad.
• Don't buy designer clothing
  With the high street fashion retailers desperate for your custom you can buy style for less.
  Learn to use Ebay
  Turn clutter in to cash. Take some photos of your unwanted items and load them on to Ebay. You’ll be surprised by what sells.
• Shop around for the cheapest household, travel insurance, car breakdown insurance and life insurance.
  Don’t automatically renew your insurances without shopping around first.
• Cancel your gym membership
  Go running, by some weights and do press ups instead. You will still keep fit and save a fortune.
• Do not buy lottery tickets
  They cost £1 a week or even £2 if you play the midweek game. This adds up. Save your money the odds of winning are too high.
  Open a cash ISA saving account
  You can now save up to £3,600 a year in a tax-free savings account called an Isa . This means you don't pay any tax on the interest earned.
• Cancel your cable or satellite TV contract.
  There are enough channels to choose from without paying expensive satellite or cable monthly packages. Many TVs actually come with built-in freeview boxes anyway, this gives you more channels FREE.

Help Reduce Debt – What are the options?

Please find below some of the methods offered by Money Advice Direct to reduce the actual amount of your debts or reduce the monthly interest cost of the debt.

IVA – Do you have more than £15,000 worth of debt? If so, an IVA is one solution to get rid of your debt problems. An IVA is a legal agreement which works as an alternative to bankruptcy. You pay an agreed sum each month and can be debt free (subject to terms and conditions) in five years.

Please note that for consumers considering a Bankruptcy Order, Individual Voluntary Arrangement (IVA) or Protected Trust Deed (PTD); that although the consumer may become debt free (subject to terms and conditions) at the end of the Bankruptcy, IVA or PTD period, the effect on their credit rating is likely to remain on file for 6 years. In addition the consumers / debttors name, address and birth date will become public knowledge on the governments “Individual Insolvency Register”. The individual insolvency register (insolvency.gov.uk/eiir/) allows anyone to check, quickly and easily, if someone is bankrupt or has taken out an "individual voluntary arrangement" (IVA).

An IVA will reduce your debts and the repayments made, subject to creditor approval. You will be working to a strict budget so you will have to reduce what you spend.

Debt Management Plan – With a debt management plan you may be able to reduce your monthly payments and reduce the interest rates on the debts, making them easier to bear reduce what you spend. You simply make one affordable payment every month which is distributed to the creditors. A Debt Management Plan is fully flexible and can be altered at any time to suit your changing circumstances. You can even cancel your plan at any time with no penalties.

Bankruptcy – Here you will be forced to reduce what you spend because a trustee may force you to take out an income payments order. Bankruptcy offers people with severe debt a fresh start. It's the last resort in debt solutions but for some people it may be the most suitable option.

Budgeting Advice – Reducing your cost of living is not going to be an easy task. Chances are that you already practice a few of these tips, find some of them totally against your liking, or simply do not think that it will be worth it. A good budget should be comfortable and achievable. You must first reduce what your spend and then take steps to reduce the cost of the debts.

All services provided by Money Advice Direct to individuals and households chosen via our strict best advice principles. To contact an advisor call 0800 074 6918. Alternatively complete an online enquiry form and an advisor will call you back at the time that you specify

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