3 ways to get back in the black fast!

Don't leave your debts to fester. These tips should help you keep up your repayments, even when money is really tight.

In these tough times, many of us have had to modify our debt repayment plans. A lack of spare cash - combined with job insecurity - means that many people have lowered their repayment levels, or even stopped making them altogether.

Of course, it's really important you pay off your debts as quickly as possible. The sooner you get them out of the way, the less you'll end up paying in interest charges, and the quicker you can get started on building that crucial savings safety net so many of us lack.

If you feel you've got no spare cash to put towards your debts, don't despair. Here are three big steps you can take to get back into the black - even when things are really tight.

1. Slash your interest payments

Many people make regular repayments, yet their debt mountains never get any smaller. This is because their repayments are only covering the interest that's building up - not chipping away at the underlying debt.

Cutting the amount you pay in interest is probably the single most important thing you can do to help clear your debts. Let's look at the two main routes towards doing this:

The credit card option

It sounds like a dangerous thing to do, but in certain circumstances, taking out a new credit card when you're in debt can improve your financial situation. I've done it myself. It all depends on how good your credit rating is, and how disciplined you are.

If you have a very good credit rating, it's worth considering taking out a credit card which offers 0% on balance transfers. At the moment, the Virgin Money card is the market leader in this category, offering 0% interest on all debt transferred across to it for 16 months.

Unlike most 0% credit cards, you can also use the Virgin card to make 0% interest money transfers into your bank account, allowing you to clear other interest-charging debt, like personal loans or overdrafts.

Bear in mind that a transfer fee of 2.98% will apply on balance transfers and 4% for money transfers. And after 16 months, any remaining balance will be walloped with a hefty interest rate - so it's really important you clear your debt completely before then.

The current account option

A 0% credit card certainly isn't for everyone. If your credit rating is less than sparkling, you're likely to be turned down for this sort of card. This failed application will further damage your credit score, so it's definitely not a road you want to go down.

However, there are other options you can explore in order to reduce your interest payments. If you're currently paying interest on an overdraft, hunt for a current account that offers you a good interest-free overdraft deal and lets you transfer your existing overdraft debt across to it.

For example, Alliance & Leicester's Premier Direct Current Account offers new customers an interest-free overdraft of up to £2,000 for the first 12 months.

After that, a usage fee of 50p a day (up to £5 a month) applies - so it's important you clear your overdraft debt before you reach this stage.

However you do it, cutting your interest payments will free up some extra cash, so you can pay off the underlying debts more quickly.

Just make sure you don't spend it on anything frivolous instead!

2. Re-jig your repayments

The next step towards hammering down your debts is relatively pain-free - because it's about re-ordering your repayments, rather than finding extra money.

First, find out exactly what the interest rate is on each of your debts. Of course, we should all know this already, but the truth is many of us don't.

You're now in a position to 'snowball' your debts. In a nutshell, this is a repayment strategy which minimises interest charges and clears your debt as quickly as possible.

Here's how to do it:

• Remember that you need to continue making the minimum payments on all your debts, to avoid penalty fines and charges.
• If you have any spare cash after this, throw it at the most expensive debt (the one charging the highest rate of interest).
• When you've paid the 'nastiest' debt off, switch your attention to the next most expensive debt.
• Your repayments will 'snowball' as you clear the most expensive debt first, then move onto the next most expensive debt and so on. You keep doing this on all your subsequent debts until eventually they are all gone!

Make spare cash - without getting another job

It's certainly not the best time to be looking for a second or better-paid job. And if you're already up to your eyeballs trying to make ends meet, you might not have the time or energy to flog your unwanted possessions on eBay.

However, consider making better use of the space you already have. Done right, this is a low-effort way of generating extra income, which can then be thrown at your debt mountain.

For example, if you have a garage or parking spot you don't use, you could rent it out using an agency like YourParkingSpace or ParkAtMyHouse.

You could rent your empty loft out as storage space, providing it's secure, clean and dry.

And if you have a sadly-neglected garden that's fairly easily accessible, why not rent it out as an allotment? Some councils are now warning residents that there are 40 year waiting lists to bag allotments - so you might be able to whip up a lot of interest!

Have a look at the SpareGround website for similar money-raising ideas. The important thing (especially in the current climate) is that your venture should involve little or no financial outlay on your part.

Good luck beating down your debts!

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