IF you’re struggling to make ends meet you might think payday loans and credit cards are your only option – but this left Miranda Malanga £11,000 in debt.
Miranda, 34, who lives in Oxfordshire and is now a safety manager at a pharmaceutical company, found herself in a “vicious circle” when she took out payday loans to pay her bills while at university.
Payday loans are short-term loans, usually for smaller amounts of money, given to people who are having trouble stretching their money between payoffs — but they usually come with high interest rates.
Miranda’s reliance on these loans, combined with mounting credit card debt from overspending at her favorite shops, meant she owed £11,000 by the time she finished her studies.
Miranda fell into the usual trap of taking out new loans to cover her debts elsewhere.
In all, she took out six payday loans and owed £3,200.
She also owed £2,500 store cards – a type of credit card you can only use in a shop.
In addition, her credit card debt reached more than £3,200, she had £1,700 in her overdraft and she owed £690 on her phone bill.
“I felt indebted,” Miranda said.
“I wanted to get out of my situation as quickly as possible.
“I missed some payments on my payday loans and was constantly being chased with phone calls, letters, and emails.
“Some of the companies I borrowed from sold my debt on to a collection agency – it was really scary to be hounded by them.”
In 2014, Miranda decided to “stop burying her head in the sand” and pay off her debts.
In just 18 months she had cleared everything and started building up her savings and eventually even buying a house. She explains how she did it.
Miranda sat down and went through her finances to find out exactly how much she owed and to whom.
“I wrote down every single company I owed money to and calculated the amount I could afford to pay each month to pay off each debt,” she said.
“I called every lender, was honest, and shared details of all my debts to see if I could come up with a more favorable repayment schedule.”
After agreeing better repayment rates with most of her lenders, Miranda worked out which debts to focus on — so she could pay off more than the minimum each month.
“I decided to use the snowball method to pay off my debt,” she said.
“That meant paying off my smallest debts first and paying off the biggest ones last.
Although many experts advise you to pay off debt at the highest interest rate first so you end up paying off less interest, this doesn’t work for everyone.
Miranda said: “I thought it would motivate me to keep paying off debt – I wanted to see that I was making progress with my plan.
“Psychologically, this method has helped me keep my goal in mind.”
To pay off her debts faster, Miranda tried to cut back on her expenses as much as possible.
“I would aim to spend £100 a month on groceries, avoiding branded items and buying things in bulk,” she said.
“Meal planning helped me stay within that budget as I would only buy the stuff I knew I needed.”
She has scrapped the subscription, which has saved her almost £100 a month.
“I had a couple of magazine subscriptions that saved me £30 a month after canceling them.
“And I’ve ditched my gym membership which has saved me £40 a month.”
Miranda also said she “left my social life” to save £250 a month.
She previously spent up to £100 a month to see her friends and £150 on train tickets to see her family and then-boyfriend.
But she stopped doing that and chose to stay at home and save her money instead.
It took Miranda 18 months to pay off her debt.
“I felt great, but realized I had no savings at all,” she said.
“I’d spent more time paying off my debts than I could have saved to travel or build an emergency fund.”
Her debts also left black marks on her credit score because she missed some payday loan repayments.
Your credit score shows how well you’ve managed your loans over the past six years.
Lenders use it to decide whether or not to give you a loan – so a bad result can mean your application is not accepted.
Miranda waited until 2020 before seriously considering buying a home she had been saving for.
Black smudges on your credit file make it a lot harder to get a mortgage, but by then she had managed to improve her credit score significantly.
She said: “I regret taking out payday loans. “I was in a desperate situation where I needed money but if I could go back I never would.”
How to get help with your debt
If, like Miranda, you’re finding your debt overwhelming, you should take steps to get your situation under control.
Here’s how to get out of the red.
Dive into your finances
It can be tempting to try to ignore your mounting debts when you’re struggling to pay them off.
But the first thing you need to do is sit down and understand exactly how much you owe and to whom.
Once you’ve done that, you can calculate a budget based on your spending to see how much you can afford to pay off your loans.
Talk to your lenders and be honest about your situation – you may be able to negotiate a more favorable repayment schedule.
Prioritize your debt
If you don’t have enough cash to pay off all of your debts, you should pay off your biggest debts first.
These are the ones that can cause you to lose your home, for example, or pay staggering interest—like your mortgage, council tax, and utility bills.
Pay out more than the minimum
If you can afford it, try to pay off more than the minimum amount of your debt each month.
If you only make the minimum repayments, it will take much longer to pay off your debt and you will also end up paying more interest.
See how much more you can afford each month—then decide which debt to focus on.
You could go the snowball method like Miranda and put more money on your smallest debt first — or you could go for the highest-interest debt.
You can get free advice on how to pay off your debt.
Here are some charities and organizations that will help you get your finances in order and you don’t have to pay them a dime for their help:
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