We’re running a Christmas competition with a difference this year to help one lucky winner take the pressure off this Christmas and, most importantly, keep it off in the New Year. T&Cs apply - see below.
The prize consists of £2,033 cash - the equivalent of the UK’s average household credit card debt* - paid directly into the winner’s bank account. On top of that, our winner will also be able to claim 5 hours of free coaching with Personal Finance Coach and guru, Tolu Frimpong, to help them build healthy money mindsets and work towards their financial goals, whatever they might be.
The competition is free to enter - all you need to do is tell us how you plan to take control of your borrowing in the New Year on one of our channels using the instructions below. Any responses shared on or relating to posts other than the ones below
Comment on the announcement post telling us how you plan to get debt fit using the hashtag #GetDebtFit and tag a friend.
Comment on the announcement post telling us how you plan to get debt fit using the hashtag #GetDebtFit.
Quote retweet the announcement post telling us how you plan to get debt fit using the hashtag #GetDebtFit.
The competition closes at 23:59 on 12th December and the winner will be announced on our social channels at 18:00 on the 14th December 2021, so make sure you follow our channels to hear if you’ve won.
Tolu Frimpong is a UK-based finance content creator and coach who has been helping people in the UK take control of their finances for the past XX years. Through budgeting, one on one sessions and additional resources via her website and social channels, Tolu’s work focuses on helping people to improve their relationship with money for good.
Like many other people in the UK, Tolu found herself in more debt than she was happy with and has documented her own personal debt journey publicly on her Instagram and Youtube channels. She’s even written a book, ‘How I Paid Off £36,000 debt’, sharing her progress. Tolu now aims to help people break the payday-to-payday cycle, start saving, pay off debt and achieve their financial goals, through the power of intentional budgeting.
Don’t wait to see if you’ve won before taking steps to improve your financial circumstances. If you’re in debt, there may be changes you can make - big and small - that could have a difference on your financial wellbeing overall.
This is a really important starting point because it will affect how you approach managing your debt. For example, if your goal is to pay off your debt while paying the least amount of interest possible, you’ll need to concentrate your efforts on things like paying down debts with the highest interest first. If, however, your goal is to have more cash available at the end of the month, restructuring your borrowing into simple payments could be a better strategy for you.
Really get under the skin of your debt so you have a full picture of what you owe and how much you’re currently repaying, as well as how you’re repaying and how much your debt is costing you. Do you pay the minimum, a fixed amount, what you’ve got spare or sometimes in full? Be sure to check what the interest is on each of your accounts and make a note of any fees that you might have been charged as a result of missing payments or exceeding credit limits.
It’s also a good idea to figure out your monthly budget, to see how much you can realistically pay towards your debts once essentials have been paid.
Once you’re armed with the right information and have a good grasp of the borrowing products you use, you can start to consider your options.
Your best options will depend on a number of things, including how much you can afford to put towards your debt and whether you’re eligible to switch to other products. You could just make changes to repayments, or combine that with changing which products you use. All of which will depend on those goals.
Review your repayments
Changing your repayments can be relatively straightforward and have a big impact. For example, if you had a credit card debt of £4,476 at an APR of 21.9%, your next minimum payment would be £119, assuming the terms are 1% of balance plus interest or £5, whichever is greater. If you just kept paying the minimum, with no further borrowing, it would take 30 years and 10 months and cost £7125 in interest to pay this off.
However, a simple and often affordable change is just to fix your payment at the current minimum repayment, as long as you stop borrowing. In this example, paying £119 per month, with no further borrowing, would reduce the interest to £2,612 and take 5 years and 1 month to repay.
That’s a saving of £4,513 in interest and 25 years and 9 months off the time to repay.
For a more hands-on approach, you can consider some repayment techniques, such as the Debt Avalanche method or the Debt Snowball method. However, the most important thing to remember is always to pay the minimum repayment. Missing payments can have a really big impact on your credit score and affect your ability to borrow in future, as well as incurring additional fees, which will add to your overall debt.
See if you should switch
A relatively easy thing to look at is a straight swap from one product to another, for example, a credit card at 27.9% for one at 21.9%. You’ll need to check your eligibility and whether you’ll receive the ‘representative APR’ (which at least 51% of customers will be on, but it may still depend on your circumstances).
If you can swap to a 0% balance transfer card, that can give you time and room in your budget to focus your efforts on clearing a balance without having the cost of interest piling up on top. Just be mindful of any fees.
If you often ‘live’ in an overdraft that charges you interest at 40%, you might want to look at a consolidation loan, either to bring down the cost of the debt or to give yourself some breathing room with your outgoings. A consolidation loan can also provide more structure to your repayments and help you to make progress.
Whatever you choose to do, make sure you understand the exact terms of any new credit agreements, any potential fees and how much it will cost you overall.
By following the steps above, you’ll be in a better position to take control of your debt and make better-informed decisions, as it’s only by knowing your debt that you can begin to borrow well. The ilumoni app could also help you to see your borrowing in a new light with personalised, actionable insights to support you in your journey.
*Average UK household credit card debt as reported by the Money Charity in October 2021
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