Unfortunately, it’s much easier to get into debt than to get out of debt. Credit card companies push their products and send you offers every week; retailers entice shoppers to apply for store credit cards in exchange for discounts; banks continually send loan offers your way – and it all equates to you repaying that debt at a hefty annual percentage rate.
There are many reasons and circumstances that drive us into financial difficulty – illness, unemployment, and marital problems, to name a few. Communication with your creditors is imperative to solving financial difficulties. Ignoring bills and letters from your creditors won’t help you much. If you try to avoid responding to them for too long, they’ll send someone to knock on your door.
Credit card companies, banks, utility companies and other lenders have well-established debt recovery procedures, and it may involve you getting cut off, frozen or made homeless if you fail to pay your debts.
But don’t despair! It’s not too late to get out of debt. Here’s three-step strategy for taking back control of your fincancial life:
- Negotiate. In most cases, creditors are willing to work with you on a repayment plan. If given the option of having you pay your debt over a longer period time in smaller installments or not paying at all, they’ll pick the first option. The second option isn’t good for you or them. If you contact your creditors to set up a repayment plan, it shows you are serious about overcoming your problems.
- Cut Back. Next, you must cut out all unnecessary expenses. If you think you’ve already done so, then try using David Bach’s Latte Calculator to track your spending and find extra money to pay down debt. My guess is, you can find more places to cut back. Another area you should investigate is your credit card interest rates. Try to negotiate with your credit card companies to get lower rates. If that doesn’t work (it usually will), many credit card providers will offer zero interest on transferred balances for up to six months. This only defers problems, but it may give you the time you need to pay down that debt. Just don’t forget that the rate will go up in six months, and don’t be tempted to use the new lower interest rate to create more debt!
- Budget. The third step is to track income and expenses carefully. Make a list of all your expenses for the month. That doesn’t mean just bills. Track how much money you spend on groceries, eating out, entertainment, clothes, transportation – everything. Make changes to your way of life and save some money (see step 2 again). Use that money to pay back debts. You should also stop getting further into debt – try surviving only on cash and debit cards.
Finally, be very wary of taking out new loans to pay off old ones. Consolidation loans often carry very high interest rates, and you could end up with new debts that you can’t afford.
1 comment so far ↓
This is a nice blog which help us to know more on how to get out of our debt. Moreover it is very interesting to go through it. In order to get out of debt we should spending much and record our spending. Categorize your monthly expenses into logical groups and Write down the amount you spent in each category of spending last month as you budget for spending for the next month. We should also Figure out our debt pay down fund amount and how much you owe, to whom, and on what terms.
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