Debt consolidation ‘should start with costliest ones’

Debt consolidation efforts should prioritise paying off the most expensive bill first, an expert has stated.

Many consumers have multiple debts and director at Ark Financial Planning Phil Perry said sorting them out means acting methodically.

"Obtain your credit statements and assess that to see where you stand and what you have got coming in, what you have got going out and look for the most expensive things first and try and get rid of those things," he stated.

Mr Perry noted that in some cases, debt consolidation can be helped by transferring credit card debts to new accounts with low or zero interest introductory offers, while paying off loans is important because "interest rates are so high".

He advised that consumers should look to cut back on non-essential spending to help do this if necessary and also suggested those who are having difficulties contact their banks or building societies to see if they can arrange to reduce the monthly payments.

People whose debt is so large they cannot get on top of it even using the methods mentioned by Mr Perry may wish to consider an Individual Voluntary Arrangement.

This applies to those who have debts of £15,000 or more and works through an agreement with creditors to take a lower level of repayments over a period of up to five years, after which any remaining debt is written off.

Borrowing on loans and credit cards from Finance and Leasing Association members increased by two per cent in the three months to October 2011 compared with the corresponding period in 2010, figures from the organisation revealed last month.

Posted by Paul Thacker