How do I get out of debt?
How to Get Out of Debt in the UK: 8 Actionable Steps to Regain Control
The good news is that you’re facing your debt head-on. If you weren’t, you wouldn’t be here. When you finish this article, you’ll have the tools and knowledge to take control of your debt and start enjoying life again.
Below are the key takeaways, but read on for more detail.
How to get out of debt in 8 steps
- Assess Your Financial Situation
- Categorise Priority vs Non-Priority Debts
- Secure Essential Debt Solutions
- Strategise Unsecured Debt Relief
- Evaluate Legal & Financial Risks
- Negotiate With Creditors Effectively
- Implement Budget-Based Repayments
- Build Long-Term Financial Resilience
1. Assess Your Financial Situation
Track Income and Expenses Accurately
When you finally admit you may be struggling with debt, the typical response is to panic and stress, which can lead to rash decisions. We do not recommend this approach. The first step is to understand your financial situation. You'll be able to do this by completing our free budget planner.
Budget planner.
Do you know how much you have left at the end of each month? Do you need to send an income and expenditure to a creditor? We've got you covered. Our budget planner provides you with a simple and free way to view and track your spending.
Click here
2. Categorise Priority vs Non-Priority Debts
Essential Debts vs Unsecured Debts
Another common mistake is that people focus on incorrect debts. Your debts should be categorised into priority and non-priority debts. Priority debts can lead to serious consequences if they are not met. Examples of these include:
- Mortgage
- Car Finance
- Rent
- Council tax
- Food and water
- Secured debts
- Utility bills
Examples of non-priority debts include:
- Credit cards
- Overdrafts
- Personal loans
- Buy now, pay later
- Store cards
3. Secure Essential Debt Solutions
Protect Your Home and Essentials
Your options will vary based on the type of priority debt you hold. Repayments of non-priority debt may be contributing to your struggles with priority debt. Any payments made towards non-priority debt should be redirected to your priority debt obligations, which could alleviate the pressure.
If it doesn’t, don’t worry; we’ve got you. These sections are essential to read to explore your options depending on the type of priority debt:
4. Strategise Unsecured Debt Relief
Debt Relief Options Explained
Your options for handling unsecured debts are extensive, and you can see them all by clicking here. The difficulty lies in deciding which is best for you and making logical, not emotional, decisions.
Remember, non-priority debts are precisely as described; they are not a priority. Therefore, any money paid towards these debts should be what is left after your essential expenses and priority debts have been covered.
Examples of treating a customer with forbearance and due consideration would include the firm doing one or more of the following, as may be appropriate to the customer in the circumstances:
Accepting no payments, reduced payments or token payments for a reasonable period of time from a customer who demonstrates that meeting the customer's existing debts would mean not being able to meet the customer's priority debts or other essential living expenses;
The Financial Conduct Authority
5. Evaluate Legal & Financial Risks
Know the Consequences of Non-Payment
It is critical to establish which debts are priorities and which are non-priorities. The consequences of underpayment, non-payment, or a choice of action can be severe and may include losing your home or vehicle.
Visit our secured debt section to understand how to limit the risk of serious action.
Whereas underpayment or non-payment of non-priority debts like credit cards or personal loans may only result in a default (when you’re following the Token Payment Method).
Visit our unsecured debt section to understand how to prevent the risk of serious action.
6. Negotiate With Creditors Effectively
Maintain Clear Documentation
This action is essential, and the method of communication is equally important. Ignoring your creditors may allow them to take more severe measures to collect the debt. You should communicate with your creditors in writing to maintain a physical record of your conversations. You can learn more about communicating with your creditors in writing here.
Need help speaking to your creditors?
Let us do the work for you. Whilst you focus on the more positive things in life. You can book a 10-minute discovery call with The Real Debt Guy. We got you!
7. Implement Budget-Based Repayments
Create Affordable Payment Plans
Regardless of the type of debt, pay whatever you can afford, even if you have not received a response from the creditor after reaching out. Paying what you can shows that you’re doing your best. If you have no funds available or a negative balance at the end of every month, you cannot pay what you don’t have. It is vital to inform the creditor if this is the case through an income and expenditure statement, which you can access here.
8. Build Long-Term Financial Resilience
Learn From Past Mistakes
We all make mistakes; you’re not the first and won’t be the last. However, the most important thing to do is to learn from them. Identify what led you to this situation in the first place. Did you lose your job or your business? Could you have made provisions for an event like this by saving money or having investments? Was it an injury or illness? Could you have taken out an insurance policy to protect yourself? Or was your spending out of control, as we see in many cases? Our article, “How do I start controlling my spending?” will help you manage your money.
