No one likes being in debt. It is a hard financial burden, and if steps are not taken to get it under control, it will only snowball into a larger problem. If you’re someone who is in debt, then you may be looking for ways to get things in order. Below are a few of the options that are available to you, and how you can get started with them. In some cases, a simple phone call will be enough to get you on the right path, while in others, larger legal action will need to be taken. Take a look at the list below, and see which option is best for you.
Consolidate Your Debts
First off, if you owe money to several different places, then consolidating them into one loan may be a good first step. For people with several loans or debts, combining them into one larger debt will make it so that you only have one monthly payment to make, and this will typically be lower than the payments you are making now. Depending on what kind of interest rate you can get, and what the monthly payments will be, this option could save you a ton of money each month, and in the long-term.
One reason you may not have enough money to pay your debts off each month is because you are spending too much money elsewhere. When you’re struggling to pay your debts, take a look at what you spend money on each month, and look for ways to cut costs. For example, bring lunch to work every day rather than eating out, or carpool with a coworker to save money on gas. Look at things like your cell phone, cable, Internet, and heating bill for places where you can scale back a little bit. Every little bit you can save will add up, and allow you to put that money towards your debts.
Pay Off Higher Interest Debts
The debts that hurt the most are the ones with the higher interest rates. With these loans it seems like even though you are making the minimum payment each month, they are barely going down. One common debt strategy is to pay off the loans with the higher interest rates first, rather than the ones with the highest principal. By focusing on the debts with the higher interest rates, you’ll save money in the long run, and get these expensive loans out of the way. If you have multiple debts, pay only the minimum for the lower interest loans, and put more money into the higher interest loans to pay them off sooner.
Talk To Your Lenders
If you are really struggling with your loans, sometimes you may need to speak to the lender directly. Explain to them your situation, and inform them that you are unable to pay back your loans at the current rates. In many instances, the loan provider will be willing to work out a repayment schedule with you, in which you pay less each month, but the loan term is extended. Most loan providers would rather work with you to find a solution, rather than have you file for bankruptcy and they do not receive their money. This option does not always work, but it is worth trying before moving onto something more drastic.
File For Bankruptcy
Your final option is to file for bankruptcy. This should be considered a last resort option, and only used when all other alternatives have been explored. When you file for bankruptcy, you are given a repayment schedule in order to pay back your debts over a couple of years, and a “stay” is put on your assets so that they cannot be seized. The downside is that a bankruptcy filing will stay on your credit score for up to 10 years, making it hard to get things like loans in the future.
There is a lot to know about filing for bankruptcy, so it is recommended that you speak with an attorney. There are different types of bankruptcy filings, and you need to choose the one that is right for you. For example, Chapter 7 bankruptcy is typically used by lower-income people with few assets but a lot of debt, while a Chapter 11 bankruptcy is used by businesses. Again, a good attorney can walk you through the entire process and ensure that you handle it correctly.
Start Taking Small Steps
The only way you are going to get a handle on your debt is if you start taking some steps as soon as possible. Things like consolidating your loans, or making larger payments each month, can go a long way towards getting rid of your debts sooner, and making life a little easier. By using the right strategies, and making smart financial decisions, you can make sure that your debt does not consume your life, and that you are able to get a handle on it before long. You may not be able to pay it off over night, but little by little, that debt will disappear.