Is your personal debt out of control?

If you think your personal debt is out of control, it's vital that you take steps to get your finances back on track as soon as possible.

Of course, 'out of control' can mean different things to different people. To one person, it might mean having more than a certain amount of unsecured debt; to another it might mean spending more than a certain amount on their monthly debt payments.

However you define it, if you're feeling like this you should focus on reducing your level of debt in the shortest time possible. Depending on your financial situation (income, expenditure, level of debt, assets, etc.) and on your personality, you may choose to do this on your own or with some professional help.

This article doesn't go into the professional debt solutions that may be available. It looks at how you can reduce your debts by overpaying them. Of course, this isn't an option for everyone in debt: it's only suitable for people who still have some money left in their monthly budget once they've spent everything they have to.

So, once you've accounted for your essential expenditure (mortgage/rent, energy bills, travel, food, etc.) and your payments to your unsecured debts (from credit cards and store cards to personal loans), you should know exactly how much extra you can afford to put towards your unsecured debts.

Start with the one charging the highest interest rate: £1,000 of debt on a credit card charging 20% will grow by £200 in a year, while £1,000 of debt on a loan charging 8% will grow by only £80. (It's also important to make sure you're actually allowed to overpay - some forms of credit will charge if you repay the debt more rapidly than originally agreed.)

It's up to you to decide how much of your 'spare' money you actually put towards your debts. Some people choose to put half of it towards their debt (and keep the other half for non-essential spending), while others might prefer to put every penny they can towards their debt - spending nothing at all on luxuries, but reducing their debt much faster.

If you really want to clear your debts, it's well worth overpaying by as much as possible. The more you can overpay, the faster you'll make progress - not just because you're paying off the debt more rapidly, but because you're paying it off before it can accrue interest. In other words, you'll pay less interest in total as well as being out of debt faster.

Note: the latest figures from the Bank of England show that the UK's personal debt is now almost £1.5 trillion (that's 1,500,000,000,000 pounds), and over £230 billion (230,000,000,000 pounds) of that is unsecured debt.