Before consolidating or restructuring any debt it is extremely important to complete a financial plan of your weekly or monthly cashflow. Here are a few pointers for what's important in calculating affordability of repayments.
Draw up a monthly two-column template of income in one column and expenditure on the other. I cannot stress how important this step is. It is the hardest but most vital step and it is important to be brutally honest with yourself. A cash flow plan is a summary of your viability in financial terms and it will show you in black and white whether you can afford to live your lifestyle or not. It is at this point before you have consolidated your debts that you still have the flexibility to tweak the arrangements. But to do this sucessfully it is imperative you get a proper overview of your finances. It is helpful to imagine yourself as a business at this point with revenue and costs, some of which are fixed, some of which are flexible, and to realise that 80% of new businesses fail because of an inaccurate cashflow forecast, not because of a bad business idea. It is useful to group items in expenditure into categories such as: House, car, credit repayments, leisure, clothing, savings and other. This makes the information easier to arrange.
It is important to have an emergency fund or emergency access to cash if necessary so build this into your plan. An emergency fund is not just peace of mind but can save you money by helping you avoid bank charges and cash advance fees in times of particular hardship. Only dip into it when it is absolutely necessary.
Be realistic about what you spend on socialising and leisure. Remember that to have some form of escape is important especially when the stress of a strict budget is high.
Work out your total debt, get some quotes from your bank for rates of loans and have a play around with repayments. Most banks will happily arrange an appointment for you with one of their representatives who can help you with this.
Get a few quotes for loans. Most high street banks have an element of risk based pricing in their loans which might mean the rate they offer you is different from their quoted rate. Consider what your current account behaviour looks like to them and ask them about the risk based pricing element.
If you have some property you might want to secure your borrowing against this as it will often lower the intest rate. Be careful with this, however, as if you are unable to meet the repayments you agreed your property may be sold to reclaim your debts.
N.b. Individual circumstances vary and these articles only provided for illustrative purposes. I recommend you see a bank assistant or a financial advisor if you need help with your finances.
