If you are in debt then you may get yourself into a panic and want to repay it as soon as possible. This is quite understandable but if you want to put together a plan on how to repay things, then it is wise to take a methodical approach and try not to panic and worry. If you spend a bit of time doing some planning, your situation will not get any worse in the meantime, but you can have a more successful outcome.

  • Access scale of debt – you need to start by making sure you are completely aware of how much debt you have. This can be really scary as even if you are worried about debt and you know it is bad, you may not be aware of the scale of it. It may of course, not be as bad as you thought, but you will not know until you investigate. The point of this stage is not to panic you more but so that you can tackle it knowing what there is to actually tackle, you will be able to come up with a plan on how to handle it all, which without a knowledge of the scale of the debt, will not be possible.
  • Decide which debt to repay first – if you have multiple debts then you need to think about which you want to repay first. Financially it is wise to repay the most expensive debt first, but this may not be your one of choice or may not be possible. Some borrowing comes with an early redemption charge which you have to pay if you decide to repay the debt early. This may be well worth paying if you can save lots of money in the long term by not having to pay interest payments for so long. However, if it is extremely expensive, it may be better not to repay the debt early as it will be more expensive and repay a different one instead.

You may have personal preferences with regards to which debt you want to repay. You may not worry so much about the cost but have certain ones that really worry you and you want to get rid of. You may also prefer to pay off the smaller ones first so that you can reduce the number of debts that you have and feel more motivated to carry on knowing that one is already gone.

  • Do not increase debt – it is really important to make sure that you do not increase the debt that you have. Do not borrow money while you are trying to repay other debt. So, if you have a credit card, make sure that you do not use it, perhaps cut it up or hide it somewhere. Try not to get overdrawn either and certainly do not apply for any other loans. It is rare that borrowing to repay debt is a worthwhile thing to do. In a rare few cases having a consolidation loan or something like this can help but you need to be careful. In many cases having the loan put together in one means that you will then have no overdraft and an empty credit card where you can get money and the temptation can be really high. If this happens then you will get even more into debt.
  • See if spending can be cut – the next step is to actually tackle how you will repay the debt. The most important thing to start with is to make sure that you have enough money to cover the debt repayments that you are obliged to make and then any bills, contracts and things you need to pay as well as covering rent or mortgage, transport to work, food and other necessities. Only once all of these things are paid for can you then consider whether you can afford to start to make higher repayments in order to whittle down your debt. It may be that you have a lot of money left over after buying these necessities and will be able to afford to start to pay off your debts by reducing the amount of luxuries that you buy. You may need to give up all luxuries to make a significant impact on the debt though. This can be very difficult. It is important though, to remember that it is good marketing campaigns for brands which tell us that by buying things we are treating ourselves. Think about how much of a treat it is to be in debt and whether you really should believe them. Treating yourself to repaying your debt and having less stress sin your life will be much better than owning a new handbag or mobile phone.
  • Find ways to earn more – if cutting spending is too difficult or not possible for you then the remaining option if for you to look for ways to earn more. Then you will have extra money coming in that you can use to repay debt as long as you do not spend it on other things. It may feel impossible to earn more but there are lots of things that you can try. If you have a job already then you can try making more money there by working more hours, asking for a pay rise or trying to get a promotion. This may not be possible though or you may not work at all. It may be possible for you to work extra hours in another job, perhaps weekends or evenings, even if it is just temporary to help a bit. You may be able to work form home though and this could be the best option for anyone that has family commitments or other reasons for not being able to go out to work. There are jobs online that you could consider or you could do freelance work or start a business.

There are many lenders available to us and it can be hard to work out which is reliable. We all want to make sure that we can rely on the lender, both to stick to their terms but also to value us as customers. We can easily find so many scare stories about people being a by lenders that it is not surprising that we get suspicious and wonder whether we will be mistreated too. There is never a guarantee that things will go completely smoothly, but there are checks that you can make to improve your chances of picking a lender that is reliable.

Previous experience

It is likely that you will have had previous experience of dealing with some banks and building societies. Consider those experiences and whether they were positive or negative. Even if you were not using them to borrow money you will still have got a fee for what they were like to deal with regards to how they treat their customers.

Check with friends, family and colleagues

It can also be wise to ask people you know about their experiences. If you are taking out a specific type of loan, such as a mortgage then ask who they are with and what they think of them. They will be happy to help you and will not be biased as they have no reason to be. If you are not sure about discussing with them the specific type of loan you need, perhaps you are a bit worried about telling them you are borrowing money, then just ask them about financial institutions in general and you may still learn some really interesting information.

If they are for or against a particular lender then ask them why. They may have a reason which is not important to you. For example, they may like one because it has a local branch, when you prefer to bank online or they may use one because they have a relative that works for the company and that Is not really a good reason for preferring a particular lender. It is more important to find out how they were treated as a customer and if they would trust the lender and borrow form them again.

Read their website

It is always useful to go to the website of the lender and read up more about them. You will hopefully be able to find out more about how long they have been in existence, how the company works and what sorts of products they have. You can get a good feel for a company just by looking at the website. It is often hard to describe what you like and dislike but it can hinge on how friendly and helpful they seem. If the website is easy to use and has lots of information that can make you feel warmer towards them compared to a sparse website which is hard to navigate.

Speak to their customer services department

Although the website will give you some idea, the customer service department is who you will be likely to be dealing with if you have any queries and concerns. You want to make sure that they are polite and friendly but also capable of answering your questions satisfactorily. Therefore, it is wise to contact them before taking out a product to see what you think of them. Ask them a few questions about the product you are interested in using the method that you would prefer to contact them if you had a product with them. There are usually options such as online, email, telephone or going into a branch and so think about which you will find to be the best. You will then be able to judge them on how quickly they get back to you and how well they answer your questions. If you do this with several lenders you will be able to compare them.

This seems like quite a bit of work but it will allow you to gather information that you can use to help you to decide. It may not take that long either, but will depend on how many lenders you are choosing between. It is important to get it right though as you want to get the best from your lender. Beware of looking at ratings on websites and just going for their highest ranked. It is important to realise that we all have different ideas about what makes a good lender for one thing, and the person who ranked them may feel differently to you. So, although it can give you an indication of what one person thinks, it does not tell much about what you will think. If there are reasons or a review of the lender then this could be much more helpful.