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Levels of personal debt have increased significantly in the past 2 decades. It is now easier and more acceptable to get high levels of debt. However, for many people there comes a point where the debt seems unmanageable and therefore, they struggle to see a way out of the debt mountain. These 7 tips show how to reduce and eliminate debt. These 7 different solutions can help you to be debt free within years.
1. Don't Ignore your debt problem in the hope it will disappear.
It is a mistake to try and forget or ignore the problem of debt. It may seem unmanageable, but if you take a clear and focused attitude you can regain control and work out how to best manage the existing debt.
2. Always Try to Meet Minimum Payments.
It is very important to maintain the best possible credit rating. Therefore, it is important to make minimum payments on time. If it is a real problem, speak to your loan company and explain the situation. At least, you may be able to miss a payment, with less damage to credit rating.
3. Debt Consolidation.
There are various ways to consolidate debt. However, the basic rule is to try and pay off debts with the highest interest rate first. It may be possible to consolidate high interest debts into a lower interest debt. If possible, this avenue should be explored. If you own a house, you will be able to have a secured debt consolidation; this will have a lower interest, but at the same time, means your house is liable to repossession should you fail to meet debt payments.
4. Debt Counselling.
If you find your debt very stressful and you don't know how to manage, it is advisable to speak to an independent debt adviser. A good debt counsellor will be able to look at the problem with less emotion and more detachment; with their experience they will be able to suggest various options to reduce and eliminate debt. Often an independent counsellor may be more appropriate than friends and families as there is less emotional attachment.
5. Debt Settlement
This is a potential solution for those with very large unsecured debts. It is a solution with debt settlement companies find an agreement to reduce your debt. They negotiate with your creditors to pay upto 50% less than your total debt. The debt is then said to the "settled in full" . There are potential drawbacks of debt settlement, for example, it will have some impact on your credit rating It is not something to be entered into lightly, however, it can be a much better alternative to bankruptcy. See: Debt Settlement
6. Increase Income.
A second job is a way to be able to save extra money. This can be used to actually reduce your total debt, rather than just adding to your debt. In the long term you will save twice; not only will you benefit from reducing your debt, you will also save on interest payments.
7. Reduce Spending.
If we look closely at our spending, we may be suprised at where our money goes. For example, the TV programme, big spenders, showed in graphic fashion how much people were spending on inessential items. One girl, was spending £2,000 a year on take away coffee and pastries. In most cases, those with large debts seriously underestimated the amount they spend on certain things. If you record what you spend your money in a week you will be surprised in May when you can easily burn. And not only that, but people have found to be much happier to reduce non-essential expenses.
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