People who get deeply into debt are sometimes tempted to bend the rules a bit to escape it. This is not a good idea, because it could lead to legal repercussions. Furthermore, it isn't necessary, because there are many options available for people who are experiencing debt problems. Making a long-term plan for escaping from your debt is critical to your eventual success.
Prepayments
If your debt problems are not so serious that they have totally disrupted your cash flow, you can reduce your long-term debt burden by making prepayments on debts such as your mortgage or car loan. This will introduce a heavier financial burden in the short run, but will save you a lot of money over the long run. To put your finances back on a stable footing, the long run is what you should be focusing on. By developing a frugal financial profile and applying it to your expenditures over a period of years, you can slowly lift yourself out of debt.
Consolidation
Gain control of credit card debts by consolidating them onto one card and getting rid of all the other cards. This will make it much easier to keep track of your debt. A common problem with intrusive debt problems is a lack of awareness about the true amount of debt and the severity of the problem. By having only one credit card, and one number to remember every month, you can remain on top of your debt and focus on reducing it every month. Also, you will have only one credit card to max out, and you won't be able to increase your debt further using other cards.
Negotiating With Your Bank
Lenders are often open to negotiating with people who are having difficulty with debt. After all, the bank is not eager to repossess your house; it would much rather have the cash that you give it through your mortgage or loan payments. If you can't meet your payments, request a meeting with your loan manager and explain the situation. Some banks are willing to lower your payments or extend the conditions of your loan in situations of financial distress. Don't do this unless it's necessary to meet your payments; extending your loan will almost certainly mean that you pay out more in the long run.
Bankruptcy
Declaring bankruptcy should be a last resort, because having this on your credit history will not help you at all the next time you need to borrow money. In extreme cases of debt and financial distress, however, sometimes bankruptcy is the best option. To declare bankruptcy, you need to prove to the bank and to your lenders that you have no assets with which to pay them what you owe them. You are allowed to retain a small amount of personal necessities, but all other assets need to be liquidated and applied to your debts before you can be freed from them through bankruptcy.
0 comments:
Post a Comment