Today almost everyone is facing debt problems. For some it is because of overspending, for others compulsive spending and still others it is because they are faced with circumstances which they cannot avoid and are forced into spending their savings and taking loans.
Whatever, be the reasons, debts are bad. Almost everyone agrees to this adage, but still one can find people faced with the problem of debt.
Getting into debt is not at all a difficult thing and people can get into it in no time. If you want to stay away from debt, which in case is everyone’s dream, keep a tab on your spending. Again this is not very difficult but not too easy also. There are a series of steps which need to be taken to stay away from debt but if you are already in debt , you need to take other steps which can get your finances back on track. All this may seem easy but then again requires a consistent effort which sometimes becomes a lot difficult in the current situation where recession and financial crisis is prevalent.
Know more about debts
Debts cannot be seen in seclusion. In fact everyone is struggling with them. In the recent past the economy galloped offering huge income to people. All this had a great impact on the way people would live their life. There was a paradigm shift in the way people used to lead their life. With increased income their purchasing power increased and they would take up more towards spending to increase their standard of living. However, many would go beyond their financial capability and take bad credit personal loans to purchase things they wanted at the earliest. All this led to debt building which became a lot difficult to be paid once the recessionary phase set in.
Maintaining, Monitoring and Planning a Budget
The initial step a person should take is to prepare a budget. One should note all their expenses and the monthly commitments which are fixed. One should also provision for an account where they could account for the savings they wish to make. A lot of people are not very convinced with the idea of maintaining a budget. However, it makes a lot of sense to have a budget and stick to it because it offers a guideline to you when it comes to managing your finances in the tough times. We often tend to forget the expenses we make and hence are never able to understand the areas where we might have spend more or unnecessarily. It thus becomes difficult to prevent any unnecessary spending from your budget and that eats up your income and often is responsible for the huge debt which people face.
When you have too many debts here is what you should do to know them better and deal with them. Try and prepare a list of the debts you have. You can arrange them in the order of the dues on them. It will be preferable to arrange them in the order where the debts with a higher due should be at the top followed by the ones which are lower on the same. Take stalk of your income from all the sources and the savings which you have been making. You can divert some of your savings towards paying off your debts which are of high value and you can come down in a similar way paying each one of them.
Ways to work on the debt reduction strategies:
1) Try and pull out a fixed amount towards paying the debts you already have and are attracting the highest interest on them.
2) The budget you have, you need to follow them strictly.
3) Alternative sources of funds should be looked for and all of it should be diverted towards getting rid of your debts.
4) Maintain your cool, keep your expenses to a halt, till the time you get rid of your loans.
5) Stop the use of credit cards completely.
Utilize Assets to Pay off Your Debt:
Selling your assets which are no longer in use with you is a lot easier these days. There are several online portals like the ebay and others which can be used to sell your commodities from the convenience of your house.
Pay More Each Month
It is better that you try to save some extra money from your budget and pay to reduce your debt as soon you will lower down your debt then ultimately your interest charged will also decrease.
Mortgage Payments Restructuring
Talk to your creditor and let them know that you are facing a financial crunch. You can always approach them with a proposal to get your loan restructured. Any changes in the interest rate or term of the loan can mean a lot of relief for you and continue with your regular payments with the enhanced terms.
Refinancing option can also be exercised widely to arrange funds. If you have an asset like a home getting a refinance loan can work wonders for you. Not only can you use the funds to clear off your pre-existing debts but also use the money left after doing so to meet your other important expenses.
Transferring Credit Card Balances
You can also transfer your credit card balance to any other company which is offering you lower interest rates. This option is better to settle down credit card debt but a person should be careful with the hidden cost involved in this system.
Try and stay away from any other loan till the time you clear your debts completely. It is never a healthy decision to take any loan when you have debts to the tune that they are getting unmanageable.