In recent times there has been a significant increase in the number of people experiencing serious debt problems. Their finances have greatly suffered and some have no choice but to wish their depressing financial situation will finally come to an end. However, one needs to have a better plan other than watching himself sink in the sea of debt.
Dealing with debt problem involves several steps. This article will show you how you can cope up with your current financial situation.
1 – Evaluate your financial situation
You need to assess your current finances and try to determine your regular monthly income and how much can you allot in repaying your debts. Find ways on how you can earn additional income and on how you can lessen your spending. Come up with a detailed budget so you’ll be able to identify which category deserves a cut.
2 – Learn to prioritize
List down all your monthly obligations and basic expenses and rank them according to importance. The #1 on your list should be your rent or mortgage, and next to it would be your utility bills. Once finished, make a budget for your food and other necessities. After which, deduct the total amount of your basic expenses from your net income. The remaining amount will then be allocated to your payables.
3 – Pay the required minimum amount
There is a need for you to pay at least the minimum amount of all your monthly bills to avoid penalties and bigger interests. But if you won’t be able to pay your creditors, find the courage to talk to them and tell them that you are having trouble with your finances. You also need to mention that you need their help so you’ll be given options.
4 – Negotiate with your creditors
Many creditors are willing to negotiate. This step gives you the possibility of paying lower monthly instalments by way of extending your term of repayment through debt restructuring or by paying only the interests for the meantime.
5 – Consider the debt consolidation option
If ever the negotiation with your creditors will not succeed, it’s time to consider debt consolidation. Debt consolidation is the process of merging all your unsecured debts and paying them off through a single loan. This option practically has lower interest rates and the repayment period is longer.
However, debt consolidation is not for everyone. Most companies require you to have a regular monthly income or valuable properties, such as a home or a car. In case of non-payment, the debt consolidation company can foreclose your property.