Managing debt

Going to college these days entails a serious financial commitment. Students graduating this year face average debts of 286, according to a survey conducted by Barclays. The research found that 80% of graduates owed money to the Student Loan Company, 61% to banks and 28% to credit card companies.

The rising cost of tuition fees, the phasing out of maintenance grants and means tested student loans has resulted in more financial pressure on graduates. The average graduate starting salary is 1,700 and those at the bottom of the pay scale will have to manage debt for some time after they leave university.

The key to managing your financial situation is to find out exactly where you stand. When you know how much you owe and to whom, you can plan ahead.

Putting your finances in order


  • Make a note of all outgoings – including debt repayments – and compare them to your income. Now set a realistic budget


  • Setting a budget and sticking to it will help you regain control of your financial situation but you need to be ruthless and decide on priorities, such as food and utilities. To recover from debt, you’ll need to make sacrifices


  • After graduating you will be bombarded with offers of credit, including loans and credit cards. Credit cards can be a good thing if used responsibly and help establish a solid credit record, which you will need to secure a mortgage. However, if you use a credit card to buy essentials – weekly groceries for instance – rather than for spreading the repayment of big one-off items, you have a problem


  • Lower your credit card limit and pay off as much as possible each month, not the minimum balance. Credit card companies derive much of their profits from hefty charges for missed payments. If you can’t resist temptation, get rid of the card


  • An overdraft gives you a flexible way of managing your cash flow, but exceeding the agreed limit will also result in a stiff penalty


  • Limit the sources of debt. Consider reconciling your debt with a personal loan and take advantage of the lower interest rates available for large amounts borrowed. Discuss it with your bank or independent financial adviser, as some consolidation loans on the market are very expensive and require property as security


  • If you apply for credit and are refused, ask for details of the credit agency so you can send off for a copy of your record and correct it if necessary. Agencies such as Equifax gather information about you such as County Court judgements and your prior payment record. Previous occupants at your address may be listed on your record and can affect the decision to give you credit


  • If your debts have escalated out of control get in touch with your creditors. They are much more understanding if you anticipate trouble and ask for advice early on.



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