This piece first appeared in Community Care on 24 April 2008
The text here may not be identical to the published text

How to keep debt at bay

It’s going to be a long hot summer and a cold hard winter. Financially anyway. If you’ve got a mortgage you must be wondering whether the credit crunch is going to bite you on the bum. It might. Especially if your mortgage deal comes to an end this year. One and a half million of us have a fixed rate ending soon and more than two million have a tracker or another deal ending in the near future. They will all be more expensive to replace. So start working now to make sure you get the best deal out of the limited choice that will be available.

Step 1 – Keep your credit record clean. Lenders are getting fussy. Time was if you had a current account, a vote, and a pulse you could borrow pretty much what you wanted. Not any more. Any blemish on your credit record can make the computer say no. So meet your payment dates on credit cards, loans, mortgages, and mobile phones (other utilities are not yet part of your credit record). Make sure you are on the electoral role. Don’t enquire about taking on new debts, it leaves a footprint. Get a copy of your record (£2 only) and see if there is anything on it that may count against you. If there is and it is not true get it changed.

Step 2 – Cancel the next treat you have planned for you or your beloved. I know you think you (both) deserve it. But every £10 you spend on a treat you for yourself – or someone else – is £10 that has not been taken off your debt. And be honest – that treat is more like £100 than a tenner!

Step 3 – Cancel the treat after next as well. Use the money you save on Step 4 and 5.

Step 4 – If there is a chance that you will not be able to remortgage for the whole amount of your debt then start saving. Remember 100% deals have gone and 95% loans may be on their way out. Alternatively start over-paying on your mortgage. Remember £100 off your mortgage is not just for Christmas. It is for life. Plus compound interest.

Step 5 – If you have other debts start paying those off too. Begin with the one at the highest APR.

Debt free is the best treat you can give yourself.

 


All material on these pages is © Paul Lewis 2008