In their most recent report, Credit Action also recorded 2.3 million personal loan agreements in the second quarter of 2005. Interesting, the national money education charity discovered a gap between the interest rates advertised for loans and the actual interest rates paid by the borrowers.

So, with such volumes of debt, what is the best way forward in managing your money?

1. Prioritize your spending

   Decide what you need to buy and when you need it. If it's not a necessity, put it to the bottom of the list. With Christmas approaching, it's important that you have an awareness of your budget. Make a list of things you need to buy, including Christmas presents. Once you have a list, shop around for the cheapest deal, including some internet research. Thirty minutes of surfing the internet could result in significant savings, which will either reduce outstanding debt or contribute to savings.

2. Prioritize your borrowing

   If you borrow money, when do you think you'd be able to pay it back? For example, for smaller amounts of money that could be paid within a shorter period of time, a credit card might be the most flexible way of borrowing money. Alternatively, if you need to borrow a larger sum of money and wish to make the repayments over a longer period of time, then a personal loan could be more effective. Do some homework online, sites such as moneynet and moneyfacts provide online financial product guides and price comparison information.

3. Prioritize your requirements

   In addition to thinking about how much money you need to borrow and how you want to repay it, you may wish to look at other ways in which your financial products could work for you. Examples include cash-back, reward points, charity donations etc.

4. Never, ever, take out a store card

   Whatever the discount the store offers you on the day, remember, it won't be as a gesture of goodwill. Nearly all store cards carry a vastly inflated rate of interest and they rely on you not being able to pay off the balance in full straight away. There is a strong chance that what you ultimately end up paying, is far greater than the discount on the actual day.

5. Do you really need it?

   As Christmas approaches, it's easy to spend a little extra on clothes, food and drink and presents. However, if you make a list of what you need and stick to it, you're likely to save yourself more money this way than if you went out impulse shopping.

http://www.moneynet.co.uk/credit-card/index.shtml

http://www.moneynet.co.uk/personal-loan-guide/index.shtml

About Rachel: Rachel lives in Scotland and writes for the personal finance blog Cashzilla, a mighty personalfinanosaurus who lives in the Scottish hills near Edinburgh. When he's not writing with Rachel on personal finance issues, Cash (Rich) Zilla sees his girlfriend, Nessie the Loch Ness Monster. Visit: http://www.cashzilla.co.uk