Being in debt is something that nobody likes the thought of. Of course, not all debt is bad, and some debts are essential, for example, the mortgage on your house or the loan you had to take out to study. The word debt often has negative connotations associated with poor financial management. While this is sometimes the case, the reality is that people from all walks of life could find themselves in a tricky financial situation for lots of reasons, including being made redundant, relationship breakdown, bereavement, poor health, the rising cost of living, having a low income, and using credit cards to tide them over. If you have too much of the bad kind of debt and are struggling to meet your repayments, it can make it difficult for you to achieve other financial and life goals you may have. The sooner you confront your debt, the sooner you can make positive steps to tackle it. Here are 5 basic steps you can take.
List Everything You Owe
Start by making a list of your debts – what you owe and who you owe it to. It’s worth putting this list in order of priority, with your most important debts at the top, things like unpaid bills or rent; these are debts where serious action could be taken against you if you don’t pay them. Then list the money you owe on credit cards, overdrafts, or loans further down. Of course, these are still serious, but they shouldn’t be your first priority.
Determine A Budget
Figure out a monthly budget that clearly shows your income versus expenses. Through this, you can identify any areas where you can make cutbacks, and it will help you decide what you can realistically afford to pay your creditors. There are lots of self-help guides available online if you are struggling to work out your budget.
Consolidate Your Debts By Taking Out A Loan
It may seem counter-productive, but looking for ways to consolidate your debts into one loan with a lower interest rate could be a smart way to manage and face your debts head-on. This is especially true if you have lots of loans or credit where the interest keeps rising. If you shop around for a loan, you can find an interest rate much lower than the current interest on your debts. It will help you put one monthly payment toward your debt, which will put you in control, meaning you don’t have to worry about multiple monthly payments. Remember, it is vital to research your options when you borrow money to ensure repayments are affordable.
Seek Independent Advice
Debt can be incredibly overwhelming and stressful to deal with, which can negatively impact your health and wellbeing. If you don’t know where to turn, contacting an independent charity or organization that helps people with debt is a smart idea. They can advise you on how to get your debts in order and help you develop a plan forward. Research what is available in your area, and don’t be scared to reach out for help.
Talk To Creditors
It can be a good idea to speak to your creditors if you are falling behind on repayments. Explain your situation to them and be honest about what you can afford to pay them. You may be able to come to an arrangement to help you manage what you owe.
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