Getting out of a debt spiral is the same as pulling yourself out of a mental health slump. It's all about making reliable, manageable steps to solve the problems you're facing. The sad fact is there really is no quick fix for this kind of situation, and a lot of people end up stacking debts on top of debts looking for one.
Whatever other steps you end up taking to fix the problem the first should be to list out the debts you're actually carrying. For each of them, you'll need to factor in how much you owe, how high the interest is and what your monthly payments add up to. Armed with that information, you'll be in a much better position to deal with the trouble.
Next up, it's time to think about whether there's anything you can do to bring the cost of your debts down. You've got to watch your step here. Remember, if you think you've found a quick fix, you're probably heading into trouble. So, for instance, you've probably heard the old saying that you can't borrow your way out of debt. For the most part, that's true, but it's definitely not the whole picture. In the right circumstances, you can actually trade an expensive debt in for a cheaper one. Switching a credit card balance to a different provider with a 0% interest rate offer, for instance, will help stop the debt rocketing up for a while. Don't jump at the first easy-looking option you find, though. Grabbing a "payday loan" to pay off an urgent, high-interest debt could easily just spiral your troubles out wider.
Other things to check up on when you're sizing up your debts might include:
- Finding out if there are any benefits you should be claiming, or whether you're owed a tax refund.
- Double-checking your Council Tax charge. A lot of people are paying too much because they're either in the wrong band or don't understand the rules. You can read more about this here.
- Looking into remortgage options on your house to pay off expensive debts. Depending on your situation, this can work out much cheaper overall. However, trading an unsecured debt for one secured against your home carries risks of it own.
Once you've scouted out the size of your debts, it's time to set your priorities for paying them off. There are two basic approaches here: the avalanche or the snowball. The avalanche method starts at the top by throwing everything you can at the debt with the highest interest rate, while paying just the minimum monthly amount for the others. The up-side of this is that you'll end up saving some cash overall. The down-side, naturally enough, is that you're tackling the hardest part first and probably won't get much of a sense of progress until that first debt's gone. The snowball approach, on the other hand, starts smaller and builds speed over time. You pay down the lower-interest debts first to get rid of them altogether, then build up to the bigger ones once they're all that's left. Yes, you'll wind up paying those higher interest rates for longer this way, but it can still be more manageable option if you mental health's been suffering. Either way, it's important to have a plan so you never feel like you're throwing your cash randomly at a problem that never stops growing.