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If you find that you are struggling to meet repayments, whether it be for your mortgage, credit card or other loans, it is important not to stick your head in the sand. The faster you do something, the sooner you can be working towards a solution to get back on track.

           

In day-to-day living, most people keep up with their bills and repayments. It is often when something dramatic happens unexpectedly, such as illness or losing a job that people get into trouble.            

If you find that you are struggling to meet repayments, whether it be for your mortgage, credit card or other loans, it is important not to stick your head in the sand. At the first sign of trouble, take action straight away so that you have a plan to work to, rather than just being overwhelmed and stressed. The faster you do something, the sooner you can be working towards a solution to get back on track.

Talk to your credit provider

If you know that you are not going to be able to make your next repayment for any reason, contact the lender or credit provider quickly, even before it is due. The sooner you can talk to them about your situation, the better. If you leave it until you have already made late repayments or missing them altogether, you could be charged extra fees and these defaults could appear on your credit report.

By contacting them sooner, you may be able to avoid fees and they will have noted in their system if you have worked out a plan when you will be back on track. If they understand your situation they are then able to suggest a solution that may work for you until you can get back to making normal repayments on time. For example, they may be able to offer a temporary repayment freeze or reduced repayments for a period to help ease financial stress. You will most likely not be the first customer to be in this situation and they will be equipped to handle it.

Seek professional help

If you find that you are in over your head financially and are not sure which step to take next, it’s time to see professional help. There are financial experts, such as accountants and financial advisers, who deal with debt every day and can help create a personalised plan for you. You can also look for credit counsellors with some charities as well.

Don’t borrow more and if you do, pay it off quickly

Borrowing more money to pay bills is a slippery slope. The more you rely on credit, the harder it may be to pay it off. Although it may be tempting to take on another loan or credit card to repay your upcoming bills, in a few months’ time you may start to be overwhelmed with the debt you owe. Applying for more credit will also mean that these enquiries will appear on your credit report and too many enquiries may start to impact your ability to lend.

Consolidating debts by increasing your home loan or by rolling them into a credit card or loan with a low interest rate can be an option to give you some breathing space. The interest rate may be lower and you will have one simple repayment to focus on rather than multiple deadlines.

Be wary, as even though you are paying a lower interest rate, if you just make the minimum repayments then in effect you are spreading this debt out over the term of your home loan which will result in you paying a lot more interest and you will be worse off.