Once you’re organised and have a clearer picture of your budget and what you owe, it’s time to look at your options.
Use your savings to start paying your debts. This can save hundreds of pounds a year in interest charges. Try to keep an emergency fund to avoid having to borrow in future.
Switch credit card debts to a 0% balance transfer credit card so you won’t have to pay interest on the balance for a fixed period. Consider any transfer fee and remember the interest rate will increase after a fixed time.
Make a repayment offer to your creditors. If you’re expecting a lump sum or increased income soon, you can ask your creditors to suspend payments on your account for a set period. This is called a ‘moratorium’.
If they refuse or you have low income, offer to make small monthly payments for a set period. This shows you’re making an effort to pay your debts. If your situation doesn’t improve, ask if your creditor will consider writing off the debt altogether. The Citizens Advice Scotland website has sample letters for creditors.
If you signed a financial commitment you didn’t understand, you may be able to get your debts written off. This is rare, but if you didn’t have the mental capacity to understand the contract you signed, you may be able to get it cancelled. This might be because you have a mental illness, dementia or learning disability. Get help from an advice agency or Mind.
Equity release is a way older homeowners can release a capital sum from their home without having to move. Give equity release careful thought and always seek independent financial advice before making a decision as your home could be at risk.