Remarkable new Debt figures released – What they mean for you

Three in four people are asking for debt help while owing less than 20 times their net monthly income – the traditional trigger point measure for identifying debt as a problem. In addition, just a quarter of those getting advice are eligible for a repayment plan. New figures from the Consumer Credit Counselling Service (CCCS) suggest that more people are struggling to repay debts relating to small amounts of money. This all implies that people who are not addressing their debt concerns early on are falling into a spiral that becomes harder to break. Put very simply, this survey points to the fact that the sooner you seek help with problem debts the easier it is to get them sorted and get life back on track.

Follow our three top tips to get your debts sorted and see if a repayment plan is right for you.

1. Get a better rate on your loan or credit card

Credit card debt is some of the most expensive debt you can have. So borrowing on your credit card is going to be costly unless you have the best deal you can get.

Credit cards accounted for the highest proportion of debts, according to the CCCS, at just over 46 per cent, followed by personal loans at 39 per cent of enquiries.

If you are paying 16 per cent a year on a debt of £10,000, you would be paying £1,600 a year in interest.

So getting a 0 per cent deal if you can will give you at least that much to actually eat into the debt you have built up.

The Barclaycard Platinum card is currently offering 0 per cent on balance transfers for 15 months, with a fee of 2.9 per cent of the amount transferred charged. The rate then reverts to 15.9 per cent.

The Virgin Money credit card is offering 0 per cent on balance transfers for 16 months (offer ends Wednesday 17th March!), but charges 2.98 per cent of the amount being moved. At the end of the term, it reverts to 16.6 per cent.

In both cases, you would need to use the interest savings and any extra cash you can lay hands on to reduce the debt on the card to maximise the benefit of the 0 per cent rate.

2. Reduce your loan rate with a lower interest loan, a 0 per cent card, or using a 0 per cent overdraft.

If you can get a better rate for your loan than you currently have, then do it. You do not even have to transfer the whole loan to the same place.

For example, let’s say you have a loan of £5,000 outstanding. If you can transfer your loan to a 0 per cent credit card deal, then that would be best, and the Barclaycard Platinum or Virgin Money card would be ideal for this.

However, if you cannot get these cards, or any other 0 per cent card, then you have other options. Check out the 0 per cent overdraft from Alliance & Leicester.

You can get an arranged overdraft up to £2,000 on this account, and you would not pay any interest for the first 12 months. After that, the most you would pay is £5 a month to use this overdraft, or £60 a year. On £2,000, that works out to an interest rate of 3 per cent – still much lower than you can get on either a personal loan, many mortgages or credit cards.

Of course, that would not clear your total loan, but it will make a dent in it. So get the lowest rate you can for the remainder.

Existing Nationwide customers can get 7.6 per cent with the building society for loans of £500 or more.

If you needed to borrow £3,000, then many loans would be closed to you as the amount you need is too small for the minimums. So be wary of getting into loans that start to become much more expensive.

For example, a search on Moneyfacts came up with a loan rate of 10 per cent with Zopa on £3,000 borrowed over three years. A debt advisor can help you decide on the right course of action.

3. Speak to a debt advisor now

Debt problems are easier to sort out the sooner you address them. You may be embarrassed about the position you are in, but it will only get worse if you do nothing. Reputable debt advisors will speak to your creditors on your behalf with a view to freezing interest on existing debts and encouraging the writing off of payments you can’t afford.