The cost-of-living crisis may have abated in recent months – at least with regard to column inches and national news reports – but its impacts are still abundantly felt by millions of households across the UK. One little-publicized fact, and a sobering one to boot, is that nearly ten million people are in debt across the nation. Debt can be a difficult financial problem to solve even at the best of times, but why is it so important that people get out of it?
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Debt: The Basics
Debt is, quite simply, the owing of money to another person or organization. It is practically as simple as owing a friend for grocery or drinks money, only the stakes are often much larger – and there are legal systems at play defining your repayment obligations. Debt, in many cases, can be a good thing.
Borrowing money enables individuals to start businesses they might not have been able to start otherwise, using their future profits instead of past savings to pay for those vital first steps. Debt can be a financial backstop for people on the receiving end of unexpected and emergency costs, as with emergency overdrafts in current accounts. Debt via mortgage agreements is the only way in which most households can afford their first – and indeed next – home. But just as debt can be helpful, so too can it be dangerous.
Why Clearing Debt is Key
Without a proper plan for the repayment of a given debt, it can start to hang over your wider financial situation. If you are not careful with your money and do not treat debt with the import it deserves, you can find yourself continuing to spend more than you bring in, plunging yourself further and further into the red.
The further in you go, the harder it can be to claw your way back out. This is due to the interest you will find yourself paying on outstanding debts, which can balloon if left unchecked. In worst-case scenarios, unmanaged and unpaid debts can lead to collections, whereby bailiffs are instructed to remove items from your home to recoup the debt; you could even lose your home.
How to Clear Debt
Clearing debt is easier the less debt there is to clear. You can keep a close eye on your loans or credit cards and make shrewd payments to minimize costs. Getting out of serious debt is a more involved process, which requires a complete overhaul of the way you conduct your finances. In the event of your debts being spread across multiple sources, you might find it too hard to keep track of them all, resulting in monthly stings from late payment fees or interest increases. Here, a debt consolidation loan can simplify things by reducing your debt burden to one source and one rate of interest.
Professional Support
Of course, there are some situations that no amount of financial restructuring can safely solve – and some stressful situations in which vulnerable debtors may be stressed, out of options, and at risk. For these people, there are debt-support charities and legal systems in place to protect them from the damaging impacts of outstanding debts. These debt support charities can help debtors access the systems they need, such as the Debt Respite Scheme, which can give those struggling 60 days’ breathing space – a vital time in which longer-term solutions can be arranged.
Featured Photo by Mikhail Nilov: https://www.pexels.com
