When debt goes bad, it becomes more than just a financial problem. It can
take over your life. If you have a debt problem the earlier it is handled and
dealt with, the less likely it'll turn into a crisis, and the more money you'll
save in the fullness of time.
The very nature of borrowing means that interest increases over time and if
it isn't dealt with promptly, it can spiral out of control and land you into
trouble. Particularly with credit cards, when interest payments are large, and a
minimum payment offers a seemingly manageable solution; what is actually
happening is this: the balance is being eroded like the sea bites away at the
shore. It'll disappear into the ocean eventually, but might take many years to
do so. What you need is a more radical approach, where chunks of debt are eaten
away each month.
Being in debt can be a stressful time. Many people are scared to tell
husbands, wives, friends - anyone. There's a kind of stigma attached to the
problem, but there is always a way out.
Traditional debt advice proscribes borrowing your way out of a problem. Yet
this ignores the reality of most debts. A more advisable and realistic approach
would be to never borrow more to get out of debt trouble. If it is possible to
borrow more cheaply elsewhere to replace existing borrowing and consolidate your
debt, then this is an eminently sensible approach.
The first step should always be to work out your monthly outgoings and try
and trim down your spending on luxuries and things you can do without. This
doesn't mean you have to live the life of a monk and forgo all worldly
pleasures! But by adopting sensible spending patterns you can redirect some of
your monthly income into paying off your outstanding balances. Always keep at
the front of your mind the fact that the longer the debt smolders away, the more
you spend in interest payments.
Those with big debts may save thousands a year in interest by reconsidering
their borrowing commitments. Do this in three ways:
1- Lower the interest if possible by moving your debts to reduce the
interest cost.
2- Pay the worst first: prioritize paying off the highest interest rate
debts first
3- Utilize any free debt advice there is. A non-commercial agency will
give you good advice, focus you on your priorities, and place any problems in
context. Things may not be as bad as they first seem.
Of course, there's other basic, practicable things you can do on your own.
It's incredibly important to get on top of credit card debts as soon as
possible. Don't default or miss payments. Let the credit card company know if
you are going to be unable to pay - it's always better to talk to them than
putting your head in the sand.
If things aren't that bad, there's a variety of easy strategies you can
implement that will help ease things for you. Consider a credit card balance
transfer to a lender offering a lower rate of APR. This will mean you spend less
on interest payments each month and start to attack the overall balance with
real venom.
You could take out an unsecured loan as a way of consolidating your debt.
Personal loans can give you a consistent cheap debt, and as you must make the
repayments each month, it helps provide structure to your repayments. Those with
poorer credit scores might not always get decent rates, but it's still often a
cheaper option than paying back credit card debt each month, and overall a
faster method of repayment.
If you have them, use savings: The interest paid on savings is usually far
less than interest charged on borrowing, so paying off debts with savings makes
eminent sense. Even if you think of your savings as an 'emergency cash fund' or
money for the future, better to fall back on it in the short term and pay it
back later, than paying interest to a credit card company so that money for some
far flung eventuality is at your disposal.
It's worth mentioning that for many people, credit cards provide sensible
short term, flexible lending, that's both cheap and convenient. You should
always try and proceed cautiously, but credit card debt woes are not an
inevitable consequence of taking them out. Tens of millions of Americans use
credit cards cheaply and conveniently every year.
For those who feel they are in trouble, don't feel stigmatized by your debt
woes and don't pretend they're not there. Help is at hand should you seek it,
and a solution is never far away.
About the Author
Max Hunter is the
author of many credit related articles. If you are looking for help with Home
Loans or any other type of credit issue please visit us at http://www.creditcardunlimited.com
