When you are in debt and you realise that you really need to knuckle down and do something about it, the very first thing you need to do is set up a budget, or as many creditors will refer to it, an income and expenditure form.
Simply explained it is a list of your income and a list of your outgoings to determine how much you are overspending by and how much you can realistically afford to pay debts off with. If you aren't sure where to start, there are many online income and expenditure templates that you can use and if in doubt, speak to your creditors who will be able to provide you with a template or even run through one with you.
In your budget, it's important to get every detail down on paper. Every pound counts and you don't want to set yourself a monthly budget, if you have forgotten expenses that mean you will exceed your budget. From haircuts to household cleaning products, take everything into account.
Go through the list and work out how much you spend each month including your debt payments. If, by the time you have calculated it all, your outgoings are more than your income, you need to take a look back over the numbers and see if you can realistically cut down. It's no good saying you can cut things out, if in fact, you aren't able to and ultimately fall short at the end of the month and you probably cannot repay debt.
If you really can't see where else you can save the extra cash, it's time to look at your debts and how much you have left over at the end of the month to pay your creditors. Work this out and then divide up the remainder between your creditors, depending on the amount you owe each of them. So for example, if you have £100 left over to pay your creditors, but you have a £500 debt with Mr Lender and £1500 with Uncle Buck, you will need to split it into four parts of £25. £25 should be allocated to your Mr Lender loan whilst the remaining £75 should be allocated to Uncle Buck.
If you are failing to repay on time, it's important to have all this knowledge in advance of call your creditors to make an offer for a debt management plan. It will make the whole process easier but many creditors will have scare tactics to make you agree to pay back more than you can realistically afford. Please do not worry about this. Only pay back what you can actually afford. Once your creditors have gone through your income and expenditure forms with you, they will also realise that this is all you can afford to pay.
You may have to provide evidence of your income and outgoings so be very honest about your current financial position. Once you have agreed a debt repayment plan with your creditor, you can relax, knowing that they won't chase you for payment that you simply cannot afford.
Simply explained it is a list of your income and a list of your outgoings to determine how much you are overspending by and how much you can realistically afford to pay debts off with. If you aren't sure where to start, there are many online income and expenditure templates that you can use and if in doubt, speak to your creditors who will be able to provide you with a template or even run through one with you.
In your budget, it's important to get every detail down on paper. Every pound counts and you don't want to set yourself a monthly budget, if you have forgotten expenses that mean you will exceed your budget. From haircuts to household cleaning products, take everything into account.
Go through the list and work out how much you spend each month including your debt payments. If, by the time you have calculated it all, your outgoings are more than your income, you need to take a look back over the numbers and see if you can realistically cut down. It's no good saying you can cut things out, if in fact, you aren't able to and ultimately fall short at the end of the month and you probably cannot repay debt.
If you really can't see where else you can save the extra cash, it's time to look at your debts and how much you have left over at the end of the month to pay your creditors. Work this out and then divide up the remainder between your creditors, depending on the amount you owe each of them. So for example, if you have £100 left over to pay your creditors, but you have a £500 debt with Mr Lender and £1500 with Uncle Buck, you will need to split it into four parts of £25. £25 should be allocated to your Mr Lender loan whilst the remaining £75 should be allocated to Uncle Buck.
If you are failing to repay on time, it's important to have all this knowledge in advance of call your creditors to make an offer for a debt management plan. It will make the whole process easier but many creditors will have scare tactics to make you agree to pay back more than you can realistically afford. Please do not worry about this. Only pay back what you can actually afford. Once your creditors have gone through your income and expenditure forms with you, they will also realise that this is all you can afford to pay.
You may have to provide evidence of your income and outgoings so be very honest about your current financial position. Once you have agreed a debt repayment plan with your creditor, you can relax, knowing that they won't chase you for payment that you simply cannot afford.
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