For most people, debts are confusing and can leave many of those in the red frightened. As the mortgage rates rise and the levels of credit card debt reach a record high, debt is fast becoming a fact of life. It doesn't have to be that way. Aside from not overspending in the first place, if you are in debt there are ways to reduce the damage and help move your bank balance into the black once more.



Address the issue ? The most important thing is not to ignore the debt you have, it will not go away if you do so and the situation can quickly escalate beyond your control. The financial strains of being debt are well publicised, but being in the red has a severe emotional toll as well. The stress of meeting repayments can prove too much for some people and it is important to talk about. There are several charities around who offer advice and assist you with a plan to help sort the debt out.

Prioritisation ? One of the best methods to manage any existing debt you have is to sit down and deal with each individual item in order of importance. For instance, mortgage payments are usually the first payment on the list, but this should be followed by high interest credit or store cards. Many card companies now promote special ?balance transfer? offer, so if you can it is a good idea to shop around and find one that offers a lower interest rate than your current provider.

Credit cards ? Most people have one ? even if just for emergencies ? but overspending on these constitutes one of the most common forms of debt. A lot of credit cards come with an extortionate interest rate attached and many people paying around 20%, but there are firms out there who will offer credit at little more than 5%, the standard rate of interest as set by the Bank of England. It is important to read the fine print ? banks that offer 0% will only be doing so for a limited amount of time (typically 3-6 months) so it is crucial to be aware when that expires. Store cards are the worst offenders, with limited interest free deals that appear good value for money. When they eventually start charging interest, however, their rates are far higher than those of credit cards so if absolutely necessary it is highly advisable to pay them off before that date arrives. The way to handle credit cards is simple: if you don't trust yourself to manage the finances that come with it, don't get one.

Debt Counselling ? It is usually a good idea to stay away from this kind of service, especially the kind you have to pay for, no matter how good the advice may seem to be. There are now plenty of companies who will offer this advice for free, including the Citizens Advice Bureau (CAB).

Debt consolidation ? Debt consolidation companies offer a loan which will enable you to pay your existing debts. It sounds like a tempting deal, but this is only a quick solution to a wider problem, and most debt advisors warn people away from these companies. If you are confident that taking out a loan will help your debts, take out a personal loan instead. High street lenders will offer a competitive rate of interest and give you an unsecured loan. Although debt consolidation firms deal with your existing creditors, the loan offered usually comes with a much higher interest rate than that seen on the high street and is secured, meaning that if you do not keep to their repayment schedule, you could potentially lose your home. Loans from debt consolidation companies often also come with payment protection insurance, but on unfair terms which may not cover you in the event of an illness or redundancy.

If you do find yourself behind on payments, don't panic and bear in mind that it is very expensive for credit card companies to recover outstanding debts ? they are often far more sympathetic than people realise and most will be willing to work out an arrangement with customers.