Tough times lie ahead. For 15 years we have basked in low inflation, low interest rates and low unemployment, while the value of our homes has risen steadily. Yet Britons have drifted deep into debt: every five minutes UK personal borrowing grows by £1 million. In particular, many of us have borrowed heavily to climb up the property ladder.

Conditions are now far less sunny: Mervyn King, the Governor of the Bank of England, has said that rising food and fuel costs are likely to drive inflation higher. What he called “unwise” lending will mean that banks may fail to pass on to borrowers interest-rate cuts and in a slowing economy there will be fewer jobs. Here is our 20-point guide to staying in control of your loans in the new climate of higher-cost, harder-to-secure credit:

WATCH FOR WARNING SIGNS

Things are most worrying for the 1.4 million households that are due to come off low-price fixed-rate loans this year. But you should also be concerned if you are on a downward spiral of paying back less and less of your borrowings each month. Failing to repay your overdraft (and going up to, or exceeding, the limit regularly) is a sign of credit distress - as is taking on new borrowings, such as another credit card, without clearing the old.

CAST AROUND FOR MORE CASH...

If you have suffered redundancy or are employed on short-term contracts, you may have paid too much tax under PAYE and may be due a refund. Check with Revenue & Customs.

Go online to www.direct.gov.uk and check if you are getting all the benefits due to you.

Check on your tax credits at www.taxcredits.inlandrevenue.gov.uk.

... AND CUT BACK YOUR SPENDING

Budget sheets and a calculator can be found at www.moneybasics.co.uk.

Could you pay less for expensive items such as utilities? Check at a price-comparison site such as www.uswitch.com .

Ditch insurance policies you don't need, such as payment protection insurance (PPI) or mobile phone cover. Cancelling PPI on a £5,000 loan over three years will save £366.60 a year.

The websites www.creditaction.org.uk and www.moneysavingexpert.co.uk have hundreds of money-saving ideas.

APPROACH YOUR LENDER...

Ask your lender for advice. If your problem is short-term - perhaps you were off work because of an illness - it may offer a payment holiday during which it will accept lower or even no payments. It may even suggest an alternative mortgage.

If you are repaying both capital and interest, switch to an interest-only loan. On a £200,000 loan, a borrower paying 6 per cent can save £289 a month this way. But be sure to begin repaying the capital again as soon as you can.

Increase the term of your loan to reduce the monthly repayments due. An increase from 25 to 30 years on a £100,000 mortgage cuts £44 a month off the bill - but be warned: you will pay much more over the term of a longer loan.

You may be able to take out a cheaper mortgage with another lender, although companies have tightened their lending criteria since the credit crunch.

Pay mortgage, council tax and utility bills before credit and store card bills. Non-payment of the former can bring much harsher penalties.

Ask your lender for more time. Show it how many of the above steps you have taken. Remind it that repossession is a financial hit for both of you.

If repossession looks inevitable, aim to sell the property yourself. Point out to the lender that this serves both your interests: a far better price will be achieved if househunters see a cheerful, furnished home rather than an empty property on sale through an auction house.

Stay on the property ladder. You should be aiming to downsize to a cheaper home.

... AND CONFESS TO THE PROBLEMS

This is perhaps the most important thing of all, and involves being frank with:

Yourself. People in debt are often in denial. Do not underestimate how much you owe, or fool yourself that “a cheque is in the post”.

Your partner and older children. You may be ashamed, angry, frightened and depressed, but you need to talk to them, not least because they can try to boost their income and cut their spending. I was once phoned by a lady who had people at the door to repossess the family home, yet her husband had told her nothing.

Your mortgage company. Your lender cannot be sympathetic if you have not told it. Always communicate in writing and keep copies of letters sent and received; only make offers you can afford and back this up by showing the company your budget. Tell it about every change in your circumstances. Ask the company's advice.

Other debtors. Once you have informed your major creditor - the mortgage company - write to everyone else to whom you owe money.

Debt advice agencies. If you have several debts, it is vital to seek free and confidential help from a debt advice charity. Visit the Consumer Credit Counselling Service at www.cccs.co.uk (its free helpline is 0800 1381111) or National Debtline at www.nationaldebtline.co.uk .

The writer is president of the money education charity Credit Action

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