Afghan horsemen play Buzkashi on the outskirts of Kabul. Buzkashi is the national sport of Afghanistan, which literally translated means "goat grabbing". A headless carcass is placed in the centre of a circle and surrounded by players of two opposing teams. The object of the game is to get control of the carcass and bring it to the scoring area
(Rafiq Maqbool/AP)
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From Times Online
January 31, 2008
January 31, 2008
How to pay off your debts
James Charles
James Charles
We would all like to bury our heads in the sand when it comes to debt, but the stark reality is that the longer you leave it, the worse your situation will become, so act now. There are a number of simple steps that you can take to tackle the problem head on and get back in the black.
Prioritise
Work out which debts you need to address first. Some will be more urgent, while others, such as a student loan, can be cleared over a longer period of time. You could divide them into two groups: priority and non-priority. Mortgage repayments, for example, would be considered priority debts because failing to make your repayments could result in you losing your home.
Whether you want to tackle the smallest, largest, most expensive or cheapest debt first, it is vital that you keep up the minimum repayments on all debts. Not doing so can damage your credit score and reduce the chance of obtaining credit in the future.
Work out which debts you need to address first. Some will be more urgent, while others, such as a student loan, can be cleared over a longer period of time. You could divide them into two groups: priority and non-priority. Mortgage repayments, for example, would be considered priority debts because failing to make your repayments could result in you losing your home.
Whether you want to tackle the smallest, largest, most expensive or cheapest debt first, it is vital that you keep up the minimum repayments on all debts. Not doing so can damage your credit score and reduce the chance of obtaining credit in the future.
Background
How to improve your credit rating
How to choose a credit card
How to pay off your debts
IVAs explained
Student loans explained
Related Links
Store card interest 'extortionate'
1.7m households request debt help
Fight back against rising interest rates
How to improve your credit rating
How to choose a credit card
How to pay off your debts
IVAs explained
Student loans explained
Related Links
Store card interest 'extortionate'
1.7m households request debt help
Fight back against rising interest rates
Budget
To help to work out how much spare cash you can devote to repaying debts, it is crucial that you draw up a budget.
You can use a budget calculator online or simply sit down with an old-fashioned pen and paper and list all your income and outgoings. Then try to cut back where you can and keep a lid on costs wherever possible.
To help to work out how much spare cash you can devote to repaying debts, it is crucial that you draw up a budget.
You can use a budget calculator online or simply sit down with an old-fashioned pen and paper and list all your income and outgoings. Then try to cut back where you can and keep a lid on costs wherever possible.
A simple and obvious way to speed the process of clearing your debts is to raise your monthly payments, and there are lots of ways to get the extra money you will need to do it.
The possibilities are almost endless, from renting your driveway to selling your old mobile phone. You could try selling unwanted presents or gadgets on eBay or other auction sites.
It is also worth making sure that you are not due any tax credits or government benefits.
Check that you are on the best deals for your insurance, loans, mortgages and credit cards by using price comparison websites such as Moneyfacts.co.uk or moneysupermarket.com, Also check whether you are paying for loan insurance on your mortgage or other credit and decide whether you really need this cover.
Savings
If you have a pot of savings locked away for emergencies, consider using the money to clear debt. It is likely that the cost of your debts is more than the return on your savings.
If you have a pot of savings locked away for emergencies, consider using the money to clear debt. It is likely that the cost of your debts is more than the return on your savings.
Snowballing
Once you have organised your debts, you may want to look at clearing them through a process of snowballing.
This involves making the minimum payments on your debts but using any extra cash to pay off one of them. Once you have finished clearing this first debt, you should then focus on the second debt, using the same extra cash, plus the money that you were using to make the minimum payment on the first debt. Then simply continue this process until all your debts are cleared.
Once you have organised your debts, you may want to look at clearing them through a process of snowballing.
This involves making the minimum payments on your debts but using any extra cash to pay off one of them. Once you have finished clearing this first debt, you should then focus on the second debt, using the same extra cash, plus the money that you were using to make the minimum payment on the first debt. Then simply continue this process until all your debts are cleared.
If you are overwhelmed by the number of different debts you have, it may be worth consolidating your debts into one large loan.
The most common way of doing this is to move all your credit card balances to a new card with a 0 per cent rate for balance transfers.
But be careful if you decide to take out a consolidation loan. They can be expensive in the long term and may be secured on your home.
Communicate
Having relatively small amounts of debt is now extremely common. The average UK adult owes £29,500, including mortgages, so you are certainly not alone. However, if you are struggling to make repayments, or you are feeling overwhelmed by your situation, seek help from a debt charity.
Also try speaking to your lender. It may be willing to make an agreement over a new repayment timetable. You could also speak to a debt management company. And if you are really stuck, you could consider an individual voluntary agreement or even, as a very last resort, bankruptcy.
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