When personal circumstances change, the debt we have accrued on credit cards etc which was once manageable, becomes too much for us to handle. Does this sound familiar at all?
Why do people allow themselves to get into so much debt?
Quite often people find themselves in debt through no real fault of their own. Their debts may have been sensibly incurred, but then they are hit by a bombshell like the loss of their job or a debilitating illness or injury.
If they do not quickly manage to obtain an alternative income they are likely to find themselves stuck with considerable debts they simply cannot afford to pay back.
Of course, debt can also mount up due to poor financial management. It's all too easy to accept the extended limit offered by the credit card companies but if you have more than one card your debts become multiplied and you have little if any chance of paying the money back. Meeting the minimum monthly payments is of no real use as the interest applied to the remainder of the balance will keep the debt going on for years and years.
So, how do you keep your debts at a manageable level?
You can avoid your debts getting out of control in the first place by shopping around to get the best possible interest rates available and keeping your collection of credit cards to a minimum of one or two.
If you pay back more than the minimum amount each month this will prevent a large amount of interest accruing on the account. If, of course, you can afford to pay the whole lot back each month, this not only stands your credit rating in good stead, but also gives you the spending power available on your card should an unexpected expense arise.
How do you get out of debt?
Once you have realized and accepted that you have a debt issue you are half way to solving the problem. It takes a strong will but it is possible to clear your debts, so however desperate you may feel, all is not lost.
There are three main steps you can take when your debt is spiraling out of control.
- Stop using your credit card to make further purchases.
- Make a budget plan, allowing you to pay at least the minimum payment in order to avoid additional charges for late or insufficient payments etc. Pay more than the minimum whenever you can afford to.
- Concentrate on paying off your debts one at a time and select the debts in order of the highest interest rates being charged to be paid off first.
So what do you do?
In some instances you may be unsuccessful with debt management or not have enough money to meet the minimum payments. If this is the case, you should seek help by communicating with your creditors. Tell them you are having difficulties and they may be willing to reduce your interest rate and/or monthly payments.
Alternatively use a professional debt management solution in the form of a debt management company. As professionals they can usually negotiate a much better repayment plan than you could achieve by yourself. Often getting your repayments cut by up to 50% as well as late charges and over-limit fees refunded and/or cut.
If they are unable to accommodate you, then credit counseling alongside debt consolidation is another possibility. As a last resort, bankruptcy is an option but more often that not With a little effort on your part, you should be able to move everything under control, without the need to go further along this path.
It's a little scary, "When you go into debt over your head. However, you can go back and check if he can not do this alone and need help, I'm not afraid to ask!
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