Most of us owe at least some money, usually as a result of having a mortgage. But whilst mortgage debt is perfectly acceptable, if you are in the terrible position of being unable to pay your bills or your debts higher than your income, you have a problem. But even if you owe a small fortune, try not to panic because there is always a solution.
Face Your Problems
It is tempting to stick your head in the sand when debts begin to pile up alarmingly. However, this is not a good idea. You might be able to ignore the demanding letters from creditors or unplug the telephone to avoid threatening phone calls, but one thing you can be sure of is that your debtors are not going to magically disappear. So bite the bullet, accept you have a problem, and ask for debt management help.
Reduce the Cost of Your Debt
Not all debts are equal. Some debts, for example short-term loans, are very expensive, so it is a good idea to move expensive debts to cheaper forms of credit. However, this will only work if you still have a half-decent credit rating; anything less will lead to a slew of rejections from lenders, although you might still be eligible for bad credit loans.
Debt consolidation loans can reduce your monthly repayments but moving all of your debts under one umbrella. The downside is that you will end up paying more interest in the long run.
Debt Management Plans
Once you realise that your debts are a problem or you are struggling to meet repayments, talk to the lenders to see if there is anything they can do to ease the situation. Some lenders will freeze payments or switch you to an interest-only deal as a temporary solution until you get back on your feet. If you can only afford to make small repayments, your creditors may agree to the implementation of a debt management plan, but you will need to keep up with the repayments and your creditors can still ask you to repay the loans in full at any time.
People with serious debt problems will find it worthwhile talking to a debt counsellor. Non-profit debt counselling agencies act as intermediaries. They will be able to advice you on which type of debt management plan or Individual Voluntary Arrangement (IVA) is right for you. They will also be able talk to creditors on your behalf and prevent debt collection agents from harassing you for 30 days. So make an appointment and let them help you find a safe route out of your debt problems.
Deal with the Root Cause of Your Debt
A wise man said: debt is a symptom, not the problem. It doesn’t matter how effective your debt management strategies are, unless you address the root cause of your problems, you will soon find yourself back at square one.
Whatever you do, do not borrow money from a loan shark in a misguided attempt to pay off your debts. It will only end in tears.