There are some things that you really need to understand about debt if you owe money. It’s important to be prepared and informed if you want to get yourself out of a bad situation. Here are 5 things you really need to know.
- Bankruptcy is a Last Resort
Bankruptcy is something that is viewed differently by different people. But both conventional views of it can be incorrect. Some people see it as a great get out of jail free card that they can play when in trouble. But that’s not what bankruptcy should be about. It does offer a fresh start but only when all other options have been exhausted. Other people never consider this option even when it could actually help them. Both of these views are equally unhelpful.
- Sometimes, You Should Maintain Debt
If you have debt that is very cheap and there is some flexibility there, then you don’t need to pay it off fast. Sometimes, it can be a very good idea to maintain this kind of debt rather than clear it off. Instead, you should focus on paying other debts that are more likely to cause you financial problems in the long-term. So, if the interest rate is pretty low, this should not be a top priority. Although, it is always best to be debt free, but it’s vital to get your priorities in order.
- There Are Good and Bad Debts
Some debts are good, and this doesn’t simply mean that the terms and rates attached to them are good. It can also mean something else. For example, a mortgage is seen as a good debt. That’s because it allows you to get on the property ladder, boosts your long-term financial health and improves your life. So, you should recognize this difference between good debt and bad debt rather than viewing them all in exactly the same way. Doing that is never helpful.
- When You’re in Debt, You Still Have Rights
This is something that many people are still pretty ignorant about. They think that creditors can do pretty much anything they want if you owe them money. But that’s not the case. There are many laws and protocols that need to be followed by creditors, and they can’t simply behave in any way they like. The Fair Debt Collection Practices Act outline what your rights are and what creditors can and can’t do.
- Your Interest Rate is Affected By Your Credit Score
Your interest rates will be massively affected by your credit score. So, next time you try to borrow money, you should take this into account. And the further you get into debt, the worse those rates and loan terms will be. This is one of the reasons why so many people get into a cycle of debt. But it has to be avoided at all costs if possible. It’s best to shun loans that offer very high interest rates. It might be tempting when you need money fast, but it’s no good for your long-term finances.
Would you like to start making positive changes to your finances? Is your bank manager getting irate? Then now could be the perfect time to take steps towards getting out of debt. Contrary to popular belief, there are many different ways you can achieve that goal. You just need to stop panicking and create a plan. Sometimes it’s a good idea to get some advice from the experts, and so you might like to book an appointment to see a consultant in your area. Until that happens, the tips on this page may be of some use. Most of the changes you need to make are very simple. It’s all about learning to budget.
Reduce your monthly financial commitments
While there is little you can do to reduce the price of your rent or mortgage, there are many things you can do to limit other financial commitments. Maybe you’re paying for a top of the range automobile at the moment? You could simply sell it and buy something cheaper. You might also like to do your weekly food shopping at budget stores. Tesco and other major supermarket chains are far more expensive than the likes of Aldi. Just use your head. There is no point in paying $3 for a loaf of bread when you can get basically the same product for as little as $1 in alternative shops.
Move to a smaller property
Downsizing is always a wise move if you’re trying to get out of debt quickly. For those with young families, it might be impossible to relocate to a smaller property. However, most other people can sort something out. Perhaps you should consider buying a home in a less desirable area? That could help to save you thousands.
Consolidate your debt
If you’re struggling to repay loans, it might be time to look for a good debt consolidation service. You just have to search online and read through all the small print when looking for the best firm to help you out. The best thing about consolidating your debt is that original creditors are no longer allowed to make contact. That means those letters with the red writing should stop coming through the post. Winner!
Declare yourself bankrupt
Bankruptcy should always be used as your last resort. However, it is often the best solution if your debt is incredibly large. Whether you’re looking for a New York, Florida or Houston bankruptcy law office, you’ll need to find a suitable service as soon as possible. There are many downsides to declaring yourself bankrupt, the worst of which relates to having your name published in local newspapers. Even so; it could save you a lot of hassle.
As you can see, there are many ways you can get out of debt in less than two years. The decision is down to you. Just don’t make the mistake of ignoring your creditors, or you could end up in court sooner than you imagine. You have to let them know that you’re doing your utmost to ensure their money is paid each month.
DebtYou know it’s time to do something about your level of debt when you can no longer afford the repayments on credit cards you own, or you are taking out payday loans on a monthly basis to make ends meet.
Overdrafts, Credit Cards and Payday Loans all contribute to debt which can soon become unmanageable and cause stress and illness while worrying about how the repayments are going to be met.
Of course, there are some steps which are obviously the first to take; can you get a part time job? Do you have items you can sell? Can you cut back on your monthly household bills?
However, if you’re in serious debt, the likelihood is you have already tried these options and it’s still not enough to pay back the debt that you have.
If it seems like there is no way out, it might be time to think about setting up a trust deed. A trust deed is a government backed scheme while deals with your creditors for you – freezing interest on repayments and calling a halt to all the red letters landing on the doorstep. Instead, you pay a monthly amount to the trust deed which is distributed fairly among your creditors according to the agreement which has been made on the trust deed, usually over 3 years.
There are lots of sources for information on trust deeds which is very helpful. Be sure to work out whether a trust deed is right for you before deciding to go ahead – a trust deed is a legally binding agreement.
Although a trust deed will affect your credit rating, it’s probably pretty awful already if you haven’t been meeting monthly payments for a while. There are some other negative points to consider as well.
Overall however, if your debt is overwhelming, this could be the way to get out of it before you lose your home or your sanity – whichever comes first.
Help! My Debt is Out of Control….