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Now that the festivities of Christmas and the New Year seem like a distant memory, the kids have finally gone back to school and most of us have been back at work for a couple of weeks or so, many individual in the UK are now starting to face up to the harsh reality of the financial hangover caused by the festive period.

Once again, many people have used personal loans and other forms of credit to help them to pay for the cost of Christmas and it is now, in January, that the credit card bills start to land on the doormat and the first repayment of that new personal loan start going out of the bank, leaving a big hole in the household finances.

With many people not having enough money to see them through to their next pay day, it can be tempting to take out even more loans and credit to help bridge the gap until the next salary cheque arrives, either by using a credit card, extending the overdraft facility, or even applying for a pay day loan to make ends meet.

Clearly, this is about the worst thing someone can do if they already have large loan and credit card debts, but a large number of individuals across the country will leap at the chance of some short term cash in their hand, without fully considering the consequences of the long term problems which could be caused by taking out another personal loan or other form of credit.

According to new research from the price comparison website, U Switch.com, somewhere in the region of 40 per cent of the adult population in the UK are likely to be worse off over the course of the next twelve months, than they were throughout 2011. Less than one third (27 per cent) of individuals can expect their financial situation to remain the same or improve in the coming months.

The main reason for this is due to the rising cost of living, which has been made even worse by particularly high inflation in recent times. This, coupled with a loss of overtime and bonuses, along with increasing unemployment across the country as a whole is likely to make household finances tougher than they already are, even without taking into account the rising levels of personal loan and credit card debt which many people are taking on.

With many people seeing a reduction in their regular disposable income this year, whilst at the same time taking on more personal loan and credit card debt, it is hardly surprising that somewhere in the region of 75 per cent of the UK population are worried about their financial outlook for the next twelve months.

Many financial experts are predicting a dramatic increase in the level and amount of new loan arrears cases, as people are unable to service their loans and other debts and as borrowers default on their loans, this in turn is likely to lead to an increase in house repossessions through home owner loan defaults.

For those who can manage to do so, clearing their personal loans and other debts is likely to be one of the main priorities for the coming year, with 42 per cent of people saying they intend to pay off their loans and credit cards. In fact, debt repayment was the top New Year’s resolution this year, ahead of fitness and losing weight.

The latest figures from the Bank of England have revealed that consumers in the UK took on around £400 million worth of unsecured debt through personal loans and credit cards throughout the month of November alone last year. As well as this loan debt, the Post Office has published figures which show that around 40 per cent of consumers will be depending on credit cards or pay day loans during the month of January.

In total, around 12 million people across the country are likely to see their finances in a negative position during January, with many wondering what they can do about the problem.

Although it may be tempting, the most important thing to do is to not take on any more loans or use a credit card to make ends meet. The first thing to do is to look at existing finances in order to see where savings may be made.

Many people waste a large amount of money every month on things like club and gym memberships they do not use, through to excessive shopping at the supermarket which ends up being thrown away because it goes past its best before date. Cutting back on what you actually spend each month can make a huge difference to the household finances.

The next thing to do is to look at your existing loans and credit arrangements to find a cheaper alternative. There are many cheap loan deals on offer from lenders at the moment, particularly in the £7,500 to £15,000 loan range-the typical debt consolidation loan amount.

 By taking out a debt consolidation loan and clearing more expensive unsecured loans, it is possible to save a large amount of money each month, which could then be used to either pay the regular household bill, or clear any remaining debts.

 Similarly, expensive credit card balances could be switched to a cheaper card, using one of the many zero per cent or low interest balance transfer deals, allowing the monthly repayments to be used to repay the actual debt, rather than just the expensive interest charges.

It is important to remember however, that the original loan and card debts have not gone away in this situation, they have only been moved to a cheaper alternative and borrowers should not become complacent about their debts and take out additional loans and cards, a this will lead them straight back into a down hill spiral of debt.

For those who have already fallen into loan arrears, or defaulted on their debts, it may not be possible to take out a debt consolidation loan, or balance transfer card. In this situation, borrowers should take action as soon as they realise they have a problem.

In the first instance they should contact their lender to try and arrange a solution to their problems, which could include rescheduling a loan, or reducing interest for a fixed period until the situation is sorted out.

If this fails, or for anyone who is unsure of how to go about sorting out their loans and other finances, they should seek professional help as soon as possible, either from a financial adviser, debt management company, or one of the many debt charities across the country, such as the Citizen’s Advice Bureau, or the Consumer Credit Counselling Service.