Wednesday, October 25, 2017

Tackling debt the smart way

Whether you’ve been lured into the temptation of taking that shiny new credit card that you know you really shouldn’t, or you haven’t really had a choice about getting into debt – like investing in a home, student loan or business loan – having debts to pay off is a reality most of us will have to face at one point or another.

How you deal with your debts isn’t just a measure of your financial savvy, but your character too. Getting on top of your financial situation does require discipline, and you’ll often have to make sacrifices to get back to a good standing, and it might even feel like the tough times will never end. But the feeling of relief that you’ll experience not having to hide from debt collectors any more is immediate. And once your debts are finally cleared and all your money is ‘yours’ again, well, I’m sure you can imagine how good that’s going to feel!

It can be done – and here’s how to go about it the smart way. 

Do the math, and decide whether to go it alone or seek professional help:

Every person’s situation is unique, and your strategy for clearing your debts will have to be too. Get clear in your mind what your goal is – maybe you only have one big debt and you simply want to pay it back faster, or perhaps you have several accounts you’re battling to pay every month. If you feel like you're out of your depth about the best way to consolidate your debt, which debts are the most important to pay off first, or just where to begin, get a debt review.

Some people can sit down with their accounts, draw up their own budget, negotiate with lenders and stick to their monthly payments all on their own – but most of us can’t. Remember that humans are fickle creatures, and while you might feel prepared to make sacrifices to meet your payments for a month or two, it’s really hard to keep your enthusiasm up for the long haul, month after month after month. Not only does getting a professional agency in to help “force” you to make a manageable monthly payment, there are other benefits too.

Debt review companies can help protect your assets from repossession, reduce your interest rate and help you decide what you really can afford to pay back while still having enough money to cover your living expenses, things you might struggle with alone. Often just the act of speaking to someone honestly about your fears and realizing you’re not alone can do wonders! Pick a provider who offers a free initial consultation.

Consider a consolidated loan

Consolidating your debt can be of the best options if you have multiple debts that need to be repaid, however there are potential risks. These loans combine all your outstanding debt into one loan and one monthly repayment, and benefits can include a better interest rate, a lower overall monthly payment, protection of your credit rating and getting out of debt faster. 

Typically these are offered as either a secured or unsecured loan. Secured loans require some form of collateral, meaning that you could potentially lose your home, car, or other assets if you can’t keep up with the repayments.  Unsecured loans don’t come with this risk, but you’ll find it difficult to get one unless your credit rating is still good.

Debt settlement

Many creditors, and even some credit card companies, will negotiate with you to create a more reasonable repayment plan if you come to them hat in hand and explain your financial difficulties. If you only have one or two debts to worry about, approaching the lender yourself is always a good first port of call.

If you're not comfortable doing this yourself, then a professional debt settlement agency can assist on your behalf, although the chances are good they will take a fee.

Find creative ways to increase your income

No hard working individual wants to take on an extra job, if they can manage to find one at all; but there are ways that you can bring in a little extra money. Doing work online part time, like writing, translation, transcription or proofreading over the weekends is one avenue. Turning a hobby into a second income is another, whether you’re crafty and can sell your items online, or if you have a useful skill like sewing, carpentry, or even pet or house sitting! Having a little extra money that you can spend on yourself can help you feel less bitter about that monthly debt payment!

Learn to live more within your means

If you're in serious debt because you’ve splashed out on credit cards, clothing or store accounts, then it’s time to admit that you’ve been living beyond your means. Once you’re accustomed to a lifestyle of having what you want when you want it and never having to save up for things, then it’s going to be very difficult to adjust to one where you can’t operate that way anymore. It’s not going to be fun, and unfortunately there’s no way around it. If you have kids or family that are used to getting spoiled by you, then it can become really painful.

But it’s not all doom and gloom. When all is said and done, there is a powerful lesson to be learnt from the experience of being in debt – and never wanting to be there again! It’s an opportunity to relearn the value of money, wants versus needs, and saving for the things you really need
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