Debt doesn’t have to be scary

These days most people have some level of debt and usually manage to make regular payments, with few problems arising from it. It’s how we manage our finances and providing we borrow responsibly, a small level of debt can be built into most people’s budget. A personal loan can help when unexpected expenses – such as emergency car repair or breakdown of a kitchen appliance – arise. We can easily repay these, usually by setting up a direct debit or standard order directly from our current account.

Gone are the days when people saved up for a holiday, car or even a new TV set. We prefer to calculate the monthly payments and buy the product straight away. Sometimes we spot a fantastic never-to-be-repeated bargain. This is fine as long as we can reasonably afford the item and don’t become too greedy when we see other expensive items which we want.

However, when problems arise, such as redundancy, illness, or breaking up with a partner, the level of debt on credit cards or loans can appear quite alarming. In these circumstances it’s important to keep on top of finances and contact your creditor straight away, informing them about what is happening. If kept informed most financial firms will do their best to help by either reducing payments temporarily, or allowing you to take a payment holiday.

Sometimes relatives will happily help out with family debt. Lending from parents, for example, can be a great idea as they are usually quite flexible about repayments. They rarely charge interest and are often quite easy about when the debt needs to be repaid. It’s best though not to take advantage of their good nature and attempt to make regular repayments

Check your bank and credit card statements regularly and ensure all transactions are correct. Don’t just push statements in a drawer unopened, being too scared to look at the balance. The most important thing is to keep on top of how much money you owe along with the current interest rate of your loan(s).

If your credit rating is good you may be in a position to transfer existing debts to a new credit card with 0% interest rate. This is a good idea if you will be able to repay the loan within the specified period (6 or 9 months usually), and are responsible enough not to spend on the card. Otherwise the interest rate on this type of card can become alarmingly high.

If you find yourself regularly unable to meet existing loan payments, it’s best not to panic. Consult the Citizens’ Advice Bureau which has debt counsellors who will help you to sort out your existing commitments, and advise accordingly. They will even negotiate with your creditors and try to work out repayment plans suitable to both parties.

However, as long as we behave responsibly, a sensible level of debt can be built into most budgets. Most families would find it difficult to live without the occasional loan, especially now as Christmas is almost here.