Controlling your debt

Are you struggling to pay some of the bills? Maybe you owe money on credit cards, overdrafts and personal loans too - but don't worry, it's not all doom and gloom. While it's important not to ignore any of your debts, there are things you can do to keep it under control so you don't have to worry or panic when the reminder letters start coming through your door.

To keep down the interest you owe on cards and loans, there's a few things you can do.

• Look at any money you owe on credit cards, overdrafts and loans and find out the interest rates on each. You can check out our guide to financial jargon: it'll help you to get your head around terms like APR (annual percentage rate). Knowing this jargon will help you to spot your interest rate.
  
• In borrowing terms, the smaller your APR, the better - it means you pay a smaller amount of interest!  For example, an APR of 40% on your credit card is a bad deal: it means if you spend £100 on your card and don't pay it off for a year, you'll be charged £40 in interest. There might be other fees too. That's a total of at least £140 to pay back!
  
• The average APR on credit cards is about 18% now, but you can get a smaller one by moving your existing balances onto new cards. You can do this by applying for a new credit card that has a good deal (0% on balance transfers for a limited period - or a low lifetime APR like 8%) and moving what you owe onto it. The new credit card company generally handles the transfer for you - it's usually called a ‘balance transfer'.
  
• Some companies do a 0% APR on balance transfers for a limited time (maybe six months) - so you'd get a break on the interest payments for that period. Watch out though - the rate will go up again after that period, so you may have to move what you owe again to another low interest card to keep your payments down.  Try not to use a 0% card for new purchases either, as you might have to pay a high rate on any new spending.
  
• The other way is a ‘low lifetime balance transfer'.  These are cards that will take on the debt you owe on another credit card and they will let you pay it off on a low rate for as long as it takes you to pay it. So even if their normal interest rate is 17%, you may only be charged 5% a year to pay off your debt. You don't have to remember to move your money again, because this deal doesn't come to an end like the 0% one.

If you feel you're paying too much interest, it's a good idea to shop around for a better deal so you can shrink your payments. You can do this either online using a price comparison site like MoneyFacts.co.uk or by visiting bank branches.  This way, you can reduce the total amount you pay in the long term.

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Have you got a better idea of how to live within your means now? The next section helps you with advice on Saving money >>