What to do if in Debt
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By :
Jenny Austin
Submitted
2008-10-08 00:00:00 |
Are you concerned about meeting your next mortgage payment? Have you taken out a credit card to pay another? If your finances are maxed out it is time to wake up and take charge of the situation.
Falling into debt is not usually a result of irresponsible spending, often it occurs that everything is going along smoothly and along comes an increase in the mortgage interest rate, divorce, illness or a big tax bill. Then you really start to feel the pinch and can easily end up with quite serious financial difficulties.
Firstly you need to face your problems instead of avoiding them; unfortunately they will not just go away. Don’t be too proud to tell the people that are close to you their support and advice will reassure you. This first step in taking control of your situation will improve how you feel about your situation instead of feeling like your finances are running away with you.
Next you need to work out how these debt problems occurred, this will help you solve them. Many consumers do not even know how much they owe thus making it impossible to resolve their financial debts. Make sure you get free independent, specialist advice; there are many agencies that offer this advice for free such as the Consumer Credit Counselling Service or the National Debtline. It is useful to make a list of your creditors such as, mortgage, credit cards, council, homeowner secured loans, bridging finance, landlord, Inland Revenue, utilities, friends and family etc. Contact each of them to ascertain exactly how much you owe and explain that you are in financial difficulties. Most companies understand consumers that quickly deal with their situation and want to come to some agreement.
If you do not know where to begin, prioritise your debts, any debt that could result in you losing your home or being evicted is a priority. Utilities also command high priority as you do not want to be cut off from your gas and water supplies. Non-priority debts include arrears on secured loans, overdrafts, credit cards, charge cards, catalogues and debts to friends and family.
Make a budget that lists all of your expenditure and work out what is left each month. At this point take a look at your spending and see if savings can be made. It will then be possible for you to work out what you can afford to pay your creditors each month. Do not be tempted to over stretch yourself it is far better to make payments that you can sustain. Your creditors may expect you to draw up a debt management plan showing your current financial position in detail; a debt agency can help you with this.
Next stay focused on managing you finances do not be tempted to borrow more money to pay off your existing debts. We are constantly bombarded with television adverts to consolidate our debts. These companies however often charge fees which are either added to the loan, sell a loan that is so big it quickly becomes unaffordable, or sell you a secured loan that puts your home at risk.
Find out how much you are paying when using your overdraft, many consumers end up well into their overdrafts before pay day. You should try to cut back your spending to minimise the use of the overdraft and check out charges on other accounts as a switch could save you money. Try not to use credit card cheques or withdraw cash on a credit card as these are not cost effective ways of borrowing cash.
Now that you have your expenditure under control it is time to look at boosting your income. There are a number of possibilities, you could take on overtime or an extra part-time job, you could manage with one car instead of two if you are a two car family, you could let out a room for extra income or sort through your house and sell things that you don’t use like the brand new exercise bike that is just collecting dust in the corner. Sort out the garage and loft and go to a car boot sale, you could quite easily free up some space and generate some cash. The main point is to be pro-active and not only will you be feeling in charge of your situation, you will achieve your goal of being debt free at greater speed.
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Author Resource:-
Jenny Austin is an expert in bridging finance, as well as secured homeowner loans and secured loans
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