Reducing Debt in 5 Easy Steps

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Bad Credit Debt Consolidation Secrets
If you have managed to get yourself into a situation whereby you have many loans, credit card debt, mortgage, utilities, and other bills to pay, then think about credit card debt consolidation. It can be extremely difficult to get yourself debt free once the downward spiral has started. Maybe you had college fees to pay, got divorced, lost your job or have a large medical or legal bill to pay.
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Debt consolidation solutions - What not to do
Debt consolidation solutions, has found that as good as it sounds, debt consolidation loans rarely save you any money. In fact, they usually backfire and you wind up with an even greater debt load than before. Why does such a perfect sounding debt reduction mechanism often trap you into futher indebtedness? Because it is a strategy based upon the premise that you c... Read debt consolidation article



Reducing Debt in 5 Easy Steps
If you have incurred substantial personal debt, consider these options: budgeting, debt consolidation, credit counselling from a reputable organization and working with your creditors. You will need to choose a debt reduction method that will work best for you? The method you use will depend on your level of debt, how much spare money you have, your level of discipline, and how quickly you want to get out of debt.

1. REALISTIC BUDGETING

The first step towards taking control of your financial situation is to do a realistic assessment of your income and expenditure. Work out how much you earn (your total income) and write this figure down. Then total your expenses. This is how much you spend each month for rent, fuel, food, clothing, heating, water, electricity and other bills. The difference between your total income and your total expenses is the amount of money available to pay your creditors or lenders.

Decide if there are any monthly expenses that you can reduce or live without. Focus on lowering your expenses so that you can increase your income. You'll be amazed at how many things you can do without.

a) Debt Reduction Methods

Choose a debt reduction method that fits your situation and gives the maximum benefit. You could choose to focus on repaying debts that are most important to your credit rating or to maintaining your family's safety. Or you can start by paying off those debts with the highest interest rate thus reducing the total spent on interest charges and increasing the amount available to pay off debt.

Alternatively, you could focus on paying off bills with the lowest balances. Then the money used for those payments can go to pay off other debts.

If your credit payments (excluding mortgages) exceed 15-20% of your take home pay, you can work with creditors to set up monthly instalments that are more in line with your income.

b) Credit Cards

Transfer your credit card debts (balance) to a card offering an introductory 0% interest rate for balance transfers. Make sure you keep up the repayments and then just before your 0% introductory offer is up, apply for another 0% card, transfer the balance over before you starting paying interest - and repeat. With a good credit record, you could do this for years, moving your debt from one card to another until it's paid off.

3. DEBT CONSOLIDATION

This is when you use a new loan to pay off multiple debts. Your monthly payment will be lower because repayment is spread out over a longer period of time. This will usually eliminate the hassle of having multiple creditors, multiple bills, and multiple payments to make. It's very important not to take out any additional loans until your consolidation loan has been repaid. Borrowing against your home is a cheap way to raise money, but it's risky. If you can't make the payments - or if your payments are late - you could lose your home.

However, you could replace expensive debts with a cheaper personal loan (unsecured loan). Before taking on new debts, you might want to check out your credit history.

4. CREDIT COUNSELING

Some people are not disciplined enough to create a workable budget and stick to it. If you can't work out a repayment plan with your creditors and you can't keep track of mounting bills, consider contacting a credit counselling organization or a financial advisor. In the UK you can use free debt counselling services such as the Consumer Credit Counselling, the National Debtline and the Citizens Advice Bureau. Similar services are available in the US.

5. CONTACTING YOUR CREDITORS

A creditor is a company or person to whom you owe money. Many people struggling financially ignore debts and fear contacting their creditors. This reaction will damage your credit record. Creditors or lenders may take action against you in an effort to get payment. If you're finding it hard to get your bills paid, be the one to contact creditors. They will be more willing to work with you. Work out arrangements that satisfy you both. Explain to each lender that you aim to repay each debt in full over time, but that they must accept reduced repayments for now. Decide how much you can pay them each month and set up a debt repayment plan.

Conclusion If you're serious about reducing your debt you should stop spending on your credit cards and stop taking out new loans. To increase your income, consider finding a second job or a lodger. Claim every state benefit that you qualify for and work on cutting down your expenses. Sell stuff that you don't need on eBay or at Car Boot fairs. Put enough money aside for emergencies, but use the bulk of your savings to pay off debt. Debts usually cost you far more in interest than you gain on your savings. Also, if you have a fairly good credit record, you should transfer your debts to cheaper lenders. Finally, shop around for better deals for services and products that you use.

Disclaimer: This article does not constitute financial advice. If you require such advice, you should seek appropriate professional guidance.

Copyright © 2005. Chileshe Mwape writes for Debt Consolidation Loans UK: http://www.best-debt-consolidation-loan.co.uk/. Visit our site to consolidate debts and apply for a loan online.

This article may be reprinted as long as all the above links are active and clickable.

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Your options to debt relief

If you are in debt, well over your head in debt that is, there are options to help you overcome this situation. Let's examine five possible responses and uncover which ones lead to true debt relief.

1. Declare bankruptcy. Not as easy as it used to be especially since Congress passed and the president signed into law legislation to toughen personal bankruptcy laws earlier this year. Still, it is an option for some. Just remember: depending on which course of action you take, Chapter 7 or Chapter 13, it can have a long term impact on your credit standing.

2. Consolidate your debt through a consumer credit counseling service. Be careful as often all these companies do is get your interest rates reduced for a period of time, earn money off of your payments, and sink your credit rating! You can probably negotiate directly with your creditors for relief and save yourself money as well as your good name.

3. Get a consolidation loan. Watch out as this means borrowing from the equity you have in your house [secured credit] to pay off debt that is unsecured. Do you really want to expose your most valuable asset in that way?

4. Debt settlement. Just because you owe $50,000 to creditors does not mean you absolutely must pay it all back. With the services of a company who would arbitrate on your behalf, you can get real debt relief without the stigma of bankruptcy. Yes, your credit would take a bit of a hit but it it isn't the same as bankruptcy. You could then get out from under the remaining debt over a period of time.

5. Sit on it. In other words: do not do a thing. Sure, it is an appealing option for some but you cannot run and you cannot hide. Better to choose one of the first four options than this one!

Debt relief is possible, but it requires determination and research on your part. If you are using the services of another company to help you gain debt relief, make sure you read the small print and check out their references. Ultimately, your credit standing is in your hands. Do not trust it to those who are not actively working on your behalf.

Matt Keegan is The Article Writer who writes about topics from Aviation to Zoos. For samples of some of his work, please visit http://www.thearticlewriter.com


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Reducing Debt in 5 Easy Steps
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