Paying your debt or keeping up with your financial commitment is a day-to-day struggle. We have outlined some common options that you can work on, but it is also wise to consult professional advice if you have struggles in implementing it out alone.
CONSULT OTHERS FOR IMPARTIAL DEBT ADVICE – Seeking partial advice should not cost you. You can approach groups or organizations in your area. They will help you to decide the best options to manage or clear your debts.
OPTIONS AVAILABLE IN CLEARING YOUR DEBT – Lots of debt solutions are available – which one will be suitable for you depends on your personal circumstances. You may be able to reach an informal arrangement with the people or organizations you owe money to (also known as your creditors) to make payments based on what you can afford after essential household outgoings. For this sort of arrangement you would also ask them to freeze interest and charges.
> The Debt Arrangement Scheme – It is a free debt arrangement solution that lets you arrange your debts over time at a rate you can afford. While doing this, you will get a protection from creditors who are trying to recover their money.
> Debt Management Plan – It is a kind of arrangement set up between you and your creditors, wherein you will pay an amount you can well afford on a non-priority debts. It sets out how much you will repay and agrees a timetable for repayment. This is normally a monthly payment to a debt management company that manages to pay your creditors.
> Trust Deeds – It is a voluntary arrangement between you and creditors to pay back part of what you owe. This allows you to make a monthly payments against your unsecured debts, usually short term debts. Once that period is over, the rest of the debt is written off. Creditors in the trust deed are prevented from adding more interest to the money you owe and from taking further court action against you.
> Bankruptcy – It is a way of dealing with debts that you can no longer pay. If you declare bankruptcy, assets you have under your name will be used to cover your debts. Before declaring so, make sure to speak with a free debt adviser first. After a certain period of time, most of your outstanding debts should already be written off.
> Full or Final Arrangements – If you have funds coming in that will cover partial of your debts, you can inquire from your creditors if they accept a partial payment and allow you to write off the amount balance. Alternately, they might allow you to make monthly payments for an agreed period of time, until the full balance is written off.
When you are neck-deep in debt, you may feel that getting out of it would be next thing to impossible! But when you have the will to level up and pay your debts, you would always find a way.
Assess your lifestyle, adjust your spending, look for additional jobs that can augment your funds. Make a list of what you owe. Here, you can start by following these steps:
> How much do you owe? – It may sound like an easy thing to write, but this can be a difficult part as you may be still in denial. Pick up your pen and paper or make a spreadsheet and be realistic about it. Create a cash-flow calendar to get updated with how your spending is.
> Use cash in spending – Paying with credit card seems so easy to deal with; BUT, when you use the hard-earned cash, you will create some sort of awareness and value of your money.
> Create a rule with payments and spending – If you want to come up with a debt repayment plan, you need to set a goal or plan which is attainable and sustainable. Lessen rather than cut on spending. From the amounts you shave-off from your spending, make a record and assess how much you saved, and you can use to cover for your repayments.
At the end of every month, you will notice how much you saved from non-important purchases, and covered the amount needed for repayments, and interests you saved.
> Negotiate to reduce your rates – You can ask help in making this plan to work. Ask your lenders to assist you on how to reduce your interest rates. Perhaps you could arrange for a certain rate balance transfer of 12 month at 0% annual percentage rate and paid off within a year. Or you can just call in to inquire if you could reduce your annual percentage rate.
> Stop lending so much money to your federal/government taxes – Every month, an amount of your pay goes to your taxes. And annually, you get a tax refund. It’s just like lending your money to the IRS interest-free.
Rather than paying on your debt every month while the government gets your money, you should be using that cash toward your debt. You can put your money back in your pocket by adjusting your withholding on a W-4 Tax form. Refer to the government’s withholding calculator to figure out how many allowances you should take. File your new W-4 to your HR department and give yourself a raise.
> Ask for a professional assessment - If you are having difficulty on debt or are really unable to make payments on what you owe, you may need professional help. Credit counseling can be especially useful if you’re struggling with student loan debt or medical debt, not just credit card debt.
If you feel alarmed opening your billing and credit card statements every month, you are not alone!
With loan/debts, biggest challenge is that, it balloons quickly, kudos to the high interest rates!
Take these few steps to keep your debt from incurring mind-blowing interest rates:
> Pay More Than The Minimum Amount Required – Paying more than the minimum will greatly reduce both the time it takes you to pay off that debt and the interest that you’ll pay on it. Even if you can only pay $100 or $50 more each month, do it.
> Stop Spending. – This is self-explanatory, if you want to keep your debt from spiraling, stop adding to it. Move to spending cash until you can reduce your credit card debt. It’s tempting to pull out your plastic to pay for a new item that you fancy. But instead, save up the money first and then make your purchase. Remember, every time you make a purchase, you are making it even more difficult to pay down that debt.
> Make a Plan – You’ll have difficulty to control your debt if you don’t first draft a plan to deal with it. Target the credit card with the lowest amount of debt. Make extra payments each month on that card until it’s paid off. You can then move on to the card with the next highest amount of debt, making extra payments on it. Or, you follow the same strategy but start with the card with the highest interest rate, making extra payments on it each month until its balance hits zero. Then move on to the card with the next highest interest rate.
> Cut Unnecessary Expenses – If your credit card debt is out of control, you need to make paying it down a priority. One way to do this is to free up extra money each month by cutting down on unnecessary expenses. This could mean reducing the number of times you eat out each month and using those extra dollars on your monthly credit card payments. It could mean ending a gym membership. You can exercise without belonging to a gym, after all.
Just make sure that when you reduce an unnecessary monthly expense that you use this money to whittle down your credit card debt.
> Tackle the Reasons Behind Your Credit Card Debt – The final step in controlling your credit card debt might be the most difficult: You need to determine why you ran up so much debt. What were the reasons behind your excessive debt?
If you don’t figure out why you abused your cards, you run the risk of running up your credit card debt again after you pay it off. If you want to keep your credit card debt from ever spiraling out of control again, you need to take a close look at your negative spending habits and change them — permanently.
Speaking of debt, don’t fret because you are not alone in this battle! DEBT can be overwhelming to realize that this has gotten over your thoughts, and the stress of thinking that you may not be able to pay it. The key to RESOLVE the problem is NOW! Procrastinating the problem may only lead to deeper anxiety. Taking charge early on will get you on the path towards a better financial future.
Here are some circumstances that indicate debt it has become a problem:
> Bills piling up over the previous month’s unpaid ones.
> Paying late payment fees.
> Avoiding to open bills when they arrive.
> Delaying to balance your checkbook.
> Bounced checks.
To recognize the problem, you should know how much you actually owe. Some people don’t and try to avoid, even in denial of the current problem. Start making a list of everything you owe: mortgage, credit card, loans, or even money borrowed from family or friends. Write down:
– The lender’s name
– The amount you owe
– The term of the loan
– The interest rate and fees
Then sum them up. Looking at the numbers can be worrisome, but this is a positive – and necessary – first step to tackling your debt. Paying the minimum required amount and due date on all your debts will help you save from charges/fees.
Now that you have analyzed your debt situation, it’s time to look at your monthly budget and set realistic goals. That trip you had planned for quite some time, or the new car or house you were hoping to buy may not be in the cards right now given your new outlook on reducing your debt. Some luxuries may need to take a back seat while recovering from your debts. Practice being frugal – weigh your “needs” from the “wants”. Once you recovered from the debts, you can swiftly re-plan what you have put on hold while struggling with your funds.
Reducing debt is like losing weight. You’re not going to lose 50 pounds in a month – you need realistic goals in reasonable timeframes, and debt works the same way. For most people, it takes years to become debt-free. This doesn’t mean you have to stop enjoying your life. It’s just a reminder to live within your means and be diligent about adjusting any spending habits that have contributed to the situation you are in today. Dedicating yourself to paying off what you owe and becoming debt-free will be worth the wait, with the payoff being a brighter financial future. After all, life without financial worries will put you in a healthier perspective, and enjoy life as it is! Happy and stress free!
Your life’s biggest goals, sometimes comes with HIGH PRICE-TAGS! So, ask yourself how much is your dream could cost you?
Even if you’re unsure of the exact cost, in your mind, it’s difficult to have enough to pay in cash.
But then, CREDIT comes in! It lets you borrow money to cover your other major expenditures. However, you need to consider how will you payback the principal amount, PLUS the interest amount that goes with it. Unless you are assured of future funds the loan, better think twice, if only to protect your credit-worthiness.
Availing credit to finance major goals, may be necessary. In any situation, one usually take out a loan to be repaid over several years.
But, take note that using credit for everyday purchases that’s not affordable will put you into big trouble.
Getting into credit is not so easy. Why?
Unless you pay off your credit card bill in full, you’ll be charged interest on purchases. These costs can quickly snowball even if you’re only a day or two late – you’ll charged a late fee.
How does a lender decide if you are qualified to get a loan?
The lender will gauge creditworthiness and heavily rely on what’s written on the credit report which is done by Credit Reporting agencies. This report tells a lot about your history and past use of credit. They create a credit report for each person in their files. The information about you includes:
– Whether or not you’ve paid bills on time
– How much you’ve borrowed
– What part of your available credit you are using
– How long new applications for credit you’ve made
– You’ve used credit and the kinds you’ve used
– Whether you have ever defaulted, or failed to pay
Any lender you asked for a loan or credit card can check your credit report to determine your eligibility for credit. From the details in the report, the credit reporting agencies also determine credit score, lenders can see, too. Lenders use credit reports/scores — as important factors when deciding to lend you and what interest rate to charge. The fewer problems there are in your credit report, the higher your credit score will be. The higher your score, the more likely you’ll qualify for credit with better interest rate.
Lenders aren’t the only ones who check your credit report/score; potential employers, landlords, cell-phone providers, insurance companies, et.al.
So what can you do to make a good impression?
You might not think of using a credit card as borrowing. But as soon as you make a purchase with it, you have spent money that you must repay to the lender with interest — usually a bank or credit union — that issued the card. It’s best to use credit cards only when it’s important, like when you can’t use cash. Probably the only good reason to use a credit card is to build a strong credit history.
If you ask few bankers how to get the best interest rate possible, you don’t have to wonder any more. Here are several tips by ex-bankers on how to get the lowest interest rates.
> Make yourself an ideal client – Banks and credit union are in the business of lending money, but they want to get something out of the big risk they are taking. Here’s what you can do:
– You must have a stable job that freely sustain the funds you are borrowing.
– Look like a stable person. Stay with each of your employers for at least two years.
– You have business potential from your bank’s perspective.
– Be open to a long term relationship with your bank if they are good to you.
– Make sure you pay your bills and maintain good credit.
> Polish your credit report – Make your credit a satisfactory to the banks/credit unions.
– Obtain a copy of your credit report.
– Check your credit report for error.
– Fix derogatory information.
– Pay your bills on time.
– Don’t apply for credits too often.
> Give your banker reason to give you his best rate – Banks/union credits are out to make money too, so need to give him some good reasons to give you a good. Here is a list of the kinds of reasons that will help you with bankers:
– You are looking at moving your banking with them.
– You have a real good credit.
– You are part of an important connection to that branch.
– You have banked there for many years.
If your banker doesn’t know your history with his bank/credit union, let him know what a good client you have been over the years and how you appreciate the fact that they have been good to you (make sure that you only speak the truth. Your bank can quickly verify your story).
> If you find an awesome banker, stay with them. – Good bankers can be worth their weight in gold (well almost). If you happen to get a fantastic banker, try to stay with them for as long as you can. A good banker will take good care of you and make sure that you always get the best deal, or they can give the best deal if you chose to take them up on their offer.
> Shop around for the best interest rate. – Check out different banks and credit unions to see what interest rates they offer. Tell them you are applying for a loan or mortgage and ask to speak with a loans officer, and you are looking for the best rate and ask them what their best rate is. When you go rate shopping, don’t fill out credit applications, it will waste your time and the loan officer’s time if you are not qualified or decided in availing the offer.