Six steps to paying off your debts in 2014

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Almost nine million people in the UK are struggling with debt they can't manage.

That's according to Money Advice Service research.

The financial hangover from Christmas can put extra strain on empty pockets. The TUC say it will take the average family until summer to repay the cost.

Debt infographic

Here are six steps to tackle your debts and avoid falling further into the red.

1. Prioritise your debts

Come mid-January the first flurry of post-Christmas credit card bills will hit, but that's no reason to panic. It's a good time to get your finances in order.

When you're facing multiple bills, it's essential to prioritise payments for any loans secured against your home. Top of the list will be your mortgage or rent.

After that, make sure you can cover other essential bills like energy costs and council tax. Hire purchase agreements, child maintenance and court fines shouldn't be overlooked either.

The Money Advice Service debt checker test can give you a better understanding of your debts.

2. Deal with credit cards and overdrafts

If you have a handful of cards to pay off be sure to clear ones charging the most interest first.

When paying off your credit cards, aim to pay more than the minimum payment each month.

If you need to use your overdraft, check your bank account's charges to avoid unexpected costs.

3. Speak to your lenders

Cutting the costs

Money

If you are juggling various loans and bills, give your lender a call.

If you don't speak to the people you owe money to, your situation may become more difficult.

Tell them you are having difficulty meeting your bills and explain your situation.

If you let them know they may well be able to help you.

Most creditors will be reasonable so get in touch with them as soon as you start experiencing difficulties.

4. Avoid snap decisions

Try not to make life more difficult by adding to your debts, especially by turning to a payday lender. Many companies typically charge more than 5,000% APR.

If you do go to a payday lender make sure you'll be able to pay off what you owe before your term ends - otherwise you may get hit by extra charges.

Read the 10 things you should know about payday loans.

5. Draw up a budget

Draw up a list of your regular expenses (weekly or monthly), and compare your outgoings with your regular income, you may be able to find ways to make quick savings by cutting back on truly non-essential items.

The Money Advice Service cut-back calculator can help you make daily or weekly savings.

6. Get free debt advice

Debts can mount up, but there are several charities, government and other independent organisations that provide free, impartial and confidential advice.

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