Credit cards and mortgage payments taking all of your pay?

If you are finding it difficult to make ends meet then you are not alone. Mortgage debt in the UK amounts to £1,140 billion and credit cards to £53.5 billion.

You might well be one of the families that have enjoyed a well-deserved summer break by putting some foreign travel on your credit cards. How most families can even afford the cost of passports is beyond me with adult fees at £66 and children’s at £45 (set to rise substantially in the near future). By the time you have paid to get to an airport and possibly put your car in the long stay car park you have run up hundreds of pounds worth of costs and you’re not even in the air yet.

Now, with the summer season over we are back in the UK and into a new school term, having paid for new uniforms and the never-ending need for new shoes for growing feet.

Just as we settle down to the gloom of Autumn, the TV starts to show an increasing number of adverts for toys, the markets already gearing up for Christmas and all that that does for draining our bank balances.

You may also be one of the thousands of families coping with the claw-back of overpaid child tax credits.

Add to that, the escalating cost of winter fuel bills and is it any wonder that in the UK we have the highest figures for consumer debt in Europe?

So maybe it’s time to sit down and take a look at our outgoings…..

If you are one of the many people that only pay off the minimum amount on their credit card each month, it could be costing you a small fortune. Credit cards need to be used for short term borrowing only, and should ideally be paid off in full each month. If you have several cards then take a good look at the interest rates you are paying on each and make a concerted effort to clear the worst of them. You may still find there are deals about with zero interest if you transfer the balance but look out for cleverly hidden transfer charges.

It may be worth your while consolidating all your card debts into a personal loan but shop around for the best rate. With interest rates heading up then so is the amount that you will be charged. However, at the time of writing, Sainsbury’s offer a loan at 6.5% and the lowest cost credit card we could find is the MBNA Platinum Plus at 15.9%. Clearly it makes sense to move the debt to a lower rate if you can’t pay off your card each month. If you have several cards then why not consolidate all the debts together with the loan?

If you have big mortgage outgoings each month then you might consider remortgaging to a product with a lower rate, or if your age allows it you could extend the term. Quite often a quick call to your current lender will produce a better rate and possibly on a longer term.

If you can’t get a better rate or extend your term, and you have a repayment type, you could consider switching to an interest only mortgage. Be careful with this though, because although it can drastically reduce your monthly payments it means that you are not actually paying back any of the money borrowed. This means that when it comes to the end of the term, you will still need to pay back the original amount and that could be a substantial amount of money. However it is still an option worth considering if money is tight now and you could revert back to a repayment mortgage in years to come.

If your cashflow is a short-term problem, some lenders will allow you to take a ‘repayment holiday’ and suspend your payments for a period. Of course there is a downside to this too and the lender will charge you interest on the money you have not paid them.

Mortgages and credit cards make up the two biggest debts in a great number of households. They therefore give the greatest opportunity to reduce outgoings so it is worth spending a little time seeing if you can do something to reduce the problem.

HOWEVER WE ARE NOT FINANCIAL ADVISORS. YOU SHOULD CONSULT A FINANCIAL ADVISOR BEFORE MAKING ANY CHANGES TO YOUR FINANCIAL SITUATION.