Deal with debt or pay the price

Deal with debt or pay the price

Examples of celebrity extravagance are plentiful and the amount earned by the rich and famous is well documented.

But splashing the cash isn’t the only way celebrities get to grips with money. All that spending can sometimes lead to severe debt, which for many of us is a lot closer to home than the $10m diamond necklaces and diamond-encrusted mobile phones we read about in the papers.

Mike Tyson for example reportedly blew hundreds of millions of dollars on tigers, over 100 different cars and extravagant jewellery. But at his lowest point he owed creditors $27 million.

And Kim Basinger declared herself bankrupt in 1993 after a jury ruled she owed producers $8.1 million for backing out of a role.

Even our own Sarah Ferguson isn’t immune. The Duchess of York showed that blue blood just isn’t enough to keep in the black – in 2002 she reportedly had over $6 million in debt to repay.

These tales of woe may not sound familiar in content, but the debt spirals and the pressures of bankruptcy may well ring true. MoneyExpert.com can help you break out of the loop, and set yourself up for an excellent 2008.

Managing your debts

Balancing different debts can be confusing and can lead to your finances spiralling out of control.

You’ll probably have an overdraft, several credit cards and possibly even a store card or personal loan. Plus like millions of us you’ll probably have a mortgage to pay off too!

The problem for many people is that each source of debt will be charging a different rate of interest making it difficult to keep track of what you owe.

Get it in order

Rather than struggling with the interest calculations of lots of different demands on your finances, you should be able to save yourself time and money by paying off all the debts with one loan, and then concentrating on repaying that.

Such a loan is normally called a consolidation loan, and it should reduce the amount of interest you’re paying by offering a lower rate.

Click on MoneyExpert.com’s Debt Consolidation calculator to see what you can save.

Where to look

You can get a personal loan for sums up to £25,000, which you can normally pay back over periods as long as seven years. Rates range from around seven per cent. To compare loans click here.

Alternatively, and in particular if you are looking to borrow more than £25,000, you could try a secured loan. This can be paid off over a longer timeframe and allows you to borrow higher amounts of up to £100,000. MoneyExpert.com can show you the best deals and also give you a credit check so you are only put in touch with firms which are likely to lend to you.

You should wherever possible look to pay your debts off as quickly as you can. The longer you borrow money for the more interest you will pay.

Don’t get carried away

Consolidating your debt is a great way of re-organising your finances and setting you on course for a debt free future.

It shouldn’t be seen as a way of setting yourself up to borrow more money. You shouldn’t need to keep consolidating and consolidating. It’s time to break the debt cycle and become debt free.

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