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Debt advice: struggling with housing costs


Struggling with debt is never a good situation to be in, but when your home could be at stake things could become particularly serious. Whether you're a homeowner worried about repossession or a tenant worried about eviction, you'll need to get help as soon as you can.


There are different kinds of help available. Sometimes, all you may need are a few pointers on how to take care of your finances, but if your situation is more serious then an actual debt solution may be in order.


You should always discuss your options with a debt adviser before you make any decisions, but here's a quick guide to the various options that could help if you're struggling.


Give yourself a financial health check

First of all, it's worth taking a good look at your finances to see if you can make your housing costs more affordable without professional help. Putting together a budget (if you don't already have one) could make a surprising difference to your ability to keep up with your commitments. A lot of people find they're struggling with their housing costs because they're spending too much money on other things - not because their actual housing costs are too high.


Creating a budget is quite simple. Just take a few recent bank statements to help you identify all your regular costs (including essentials such as mortgage/rent, bills and food as well as any other essentials you regularly spend money on). Add up the total - this is your total monthly expenditure. Subtract this from your take-home pay at the start of each month, and what's left is your spending money for that month.


Managing your finances in this way can ensure that all your essential costs are covered, and that you don't spend money needed for anything important.


You could try to cut down on a few things you don't need. For example, you could have meals out once a fortnight instead of once a week, or stop buying coffees in the morning. Every small saving you make can add up to a big overall saving.


If you have tried all this and find that your outgoings still exceed your income, however, then you should talk to a professional about your options.


Finding a debt solution

The right debt solution can help to reduce the amount you pay to your unsecured debts (credit cards, unsecured loans, etc.) each month, making your commitments affordable again. Debt solutions that could help include:


Debt management plan - an informal arrangement for reduced unsecured debt repayments. This can continue until you've repaid everything you owe or until your circumstances improve. However, you will have to pay as much as you can at all times, so it's by no means an easy option.


IVA (Individual Voluntary Arrangement) - a formal solution that reduces the amount you pay towards your unsecured debts for (normally) five years, before whatever's left is written off on successful completion of the agreement. Although it can really help you stay in your home, homeowners may be required to release equity from their home in the final year of the arrangement. (This does not apply to tenants.)



Be aware that debt solutions have drawbacks. Debt management can increase the overall amount repaid, while either of the two solutions listed here will affect your credit rating - and can't go ahead without creditor approval.

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