We are living through tough economic times and the simple fact is that more people are struggling to pay their debts. Here are 5 pieces of basic advice.
During these tough economic times, we have all become accustomed to hearing the latest depressing stats regarding the numbers of people who have fallen into financial difficulty because they have been unable to keep up with loan or mortgage repayments.
For people who are starting to regularly miss their loan or mortgage repayments every month there are alternatives to bankruptcy such as an IVA (individual voluntary arrangement), which is a formal agreement with creditors to pay off a percentage of your debts over a fixed period, or a debt management plan which allows you to repay your debts at a rate you can afford. In addition, for those people who are in really serious financial difficulty, there is the last resort option of declaring bankruptcy which will seriously damage their credit rating for years to come.
Most people would prefer not to have to take one of the measures mentioned above, however, and there are things you can do to make sure you never get to that stage. The following tips are five basic measures for anyone who does not want their debt problems to get worse.
Don’t increase your debt further
Your debt problem will never be eased if you keep borrowing more money to pay off existing debts. The very first thing you must do to ease your debt problem is to stop borrowing immediately. Using your credit card must be avoided at all costs and taking out another loan to pay off an existing one is a mistake which many people make.
Work out how much you owe
Dig out all of your latest pieces of paperwork for the companies you owe money to and make a full list of what you owe and to which companies. Start with the companies you owe the most money to. List how much the minimum payment required is, along with interest rates and the outstanding balance. The total amount you owe may shock you but will also spur you into doing something about it.
Cut your costs
Take a look at everything you spend money on and work out where you can save money. A good place to start is with your utility providers. See which companies are currently offering the cheapest rates. Switching utility companies is much easier than it used to be. Mobile phone tariffs can usually be changed straight away too. You can also do away with unnecessary luxuries. Do you really need that subscription to cable sports channels? Do you really have to eat out every weekend?
Tackle one debt at a time
Now you have reduced your monthly expenditure you can use this extra money to tackle the debt with the smallest outstanding balance. Once this debt is paid you can use the money freed up from that to pay the next smallest debt and so on. This is the best way to tackle your debts. It is important that you are not tempted to spend any of the money that has been freed up on anything other than the next debt until all the debts are paid off. This will save you interest in the long run. Don’t be afraid to seek help
If there are companies who are threatening to take action against you or you are struggling to meet your payments every month then don’t be too proud to seek help. There are many organizations out there who offer free advice and in most cases, these organizations will be able to help you.