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Tackling your debts

Young and in debt: Part 1

Posted 21 July 2015

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When you’re young and struggling with debts you can’t afford to repay, it can feel as though it’s the end of the road for your finances. It doesn’t have to be as there is help available.

What would you do if you found yourself in a situation where you were paying out more than you got in? You may find that your debts start to become unmanageable, which is a worrying situation to be in no matter what stage of life you’re at. But, when you’re young and financially inexperienced, it can be particularly frightening.

Well, worry not! There are people who can help and, no matter how bad you think things are, there’s always a solution.

If you’re aged under 25 with debts that have spiralled to the point where you don’t think you can control them, you’re not alone. Other people your age have been in this situation before you, and have successfully managed to get back on top of their finances and carry on with their lives. In this three part series we’ll show you how.

Too much temptation

When you turned 18, did you start getting offers for credit through your letter box or by email? If you did, were sure you understand just how tempting it can be to just take the money and worry about the consequences later.  Of course, there’s nothing wrong with borrowing – used carefully it can be a useful tool.  But if you don’t manage it properly your borrowing can become a debt problem.   

Credit cards and loans

In days gone by, you could only spend what you had – whether that came from a job or generous parents. So, if you wanted to buy yourself a car, you’d need have the money for it before you bought it. Now, you have the opportunity to borrow money, either in the form of credit cards or loans, so you can buy what you want right now, without the pain of having to saving up.

Instead you pay the money back over a period of time! How long this will be depends on how much you’ve borrowed and if there’s any interest being applied to that amount.

Your overdraft is credit too…

Credit doesn’t just apply to loans and credit cards – your overdraft is also credit. So, if you have a bank account with an overdraft included, you have credit, that you’ll have to pay back and that will, almost certainly, incur interest charges and possibly fees too.

Of course, you don’t have to spend it and, ideally, you should see it as a safety net for the times when you really need it. However, it’s all too easy to end up relying on your overdraft more than you originally planned.

…and your store card!

Got a store card? Then you have credit. These are particularly tempting because the sales pitch offers you an instant discount on the purchase you’re making – a deliberate attempt to tempt you.

While these products all have their own benefits, if they’re not managed properly there’s a risk you’ll be left in a sticky situation. It only takes going over your authorised overdraft limit and perhaps incurring a daily charge, not paying off your store card debt within the interest-free period or missing the payment on a loan to find that you’re not staying as in control as you’d like with your borrowings.

Okay, that’ll do for part 1. In part 2 we’ll look at what you should and shouldn’t do when you find yourself with problem debt. 

by Shelley Bowers

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.