What to do when you are in debt?

WHAT TO DO WHEN IN DEBT?

You can reduce your debt by controlling your expenses and establishing a cash flow budget to pay off that debt. First, track your expenses for a month. Then, total up your expenses and analyze the figures to see where your spending can be reduced. Identify the essential expenses and cut down on the rest. The goal is to reduce current spending so that you will not need to add to your debt, and to free up cash to pay off existing debts as quickly as possible.

Start dealing with your debts by taking some or all of the following steps:

• Contact your creditors immediately when you cannot make your payments on time. Sit down with them and work out a payment plan that will reduce your payments to a manageable & affordable level.

For credit card debts, speak with the bank or card issuer to see if you can convert the sum you owe into a fixed-term loan, which may have lower interest rate than that charged for credit or charge card.

• Pay off high interest rates debts first.

Pay off loans with the highest interest rates in shortest time possible.

• Transfer debts with high interest rates to cheaper alternatives.

Check out the offer for balance transfer offered by various financial institutions. Beware of promotional rates that may rise once the offer period is over. However, financial institutions may be reluctant to allow you to consolidate your debts if you have been late or defaulted on payments for existing loans.

• Borrow only for the long term.

Ideally, you should only borrow money to finance purchases that are more likely to gain in value, such as property.

• Seek assistance from local groups.

Some organizations help those in financial trouble to get jobs and financial relief. Others offer help in specific areas, such as educational institutions giving bursaries and low-rate loans to needy students.

• Reduce credit card expenses and cash advances.

If you cannot pay off your outstanding debt in your credit card in a few months, stop using plastic to pay for lifestyle expenses, such as restaurant meals. If you do not have cash to pay for such expenses, find cheaper substitutes or postpone your spending till you are better off.

• Cut down your liabilities.

If you cannot meet the repayment for loans on big items, such as cars, consider selling them. Moreover, selling off some of your assets to repay some of your debts may help you to convince your creditor to reschedule your remaining payments.

• If your back is up against the wall already, you may want to call in for external consultants help.

Debt Management firms like RSL Management Consultancy specialize in restructuring individual/personal debt derived from unsecured loans like credit cards, personal loans, overdrafts & hire-purchase. To do that, the agency analyses the individual’s income against his/her liabilities (debts). From this crucial statement, they work out a suitable repayment plan based on his/her ability to pay to repay the debt, rather than the demanded sum from the creditors.

• If you refused to take action in managing your debt or make any payment to your creditors, you may have to face bankruptcy.

by RSL Leeo
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