Debt is an incredibly tricky subject. It can improve lives, and it can also make people miserable. ‘Good debt’ is a result of borrowing money which results in you earning back more in the long run. Whether it’s to buy a property (which will generally gain in value year on year), education to get a better job, or starting up a business. It’s agreed all-around that these are the kind of things worth borrowing money for, as they will improve your life and give you financial security.
However, debt can also be a result of people borrowing money to pay for luxuries and things they don’t really need. This can lead to a slippery slope of minimum payments and high-interest rates. Meaning that despite making payments each month, the debt never really goes down. It can quickly lead to becoming over-committed and having to then borrow more money just to get by. When you’re relying on borrowed money to pay your regular monthly bills, or are using the money you don’t have to live beyond your means it’s bad news.
If you’ve found yourself in this situation, here are some of the ways you can go about it.
Stop Overspending
Your first step would be to stop overspending, plain and simple. Work out exactly how much income you have going in, and a list of your bills that go out each month. Anything that’s not essential, get rid of it right away. For your priority household bills, give each company a ring to make sure you’re getting the best deal and reduce things as much as possible. In the case of things like medical bills, you could find out if you have a personal injury claim if someone else was at fault. Compensation to pay these bills can make life much easier. Write out a monthly budget and stick to it. Any money left over can then be used towards paying down your debts. Finally, cut up your credit cards. This will stop you from paying some off it and then spending back onto it again.
Speak To Your Creditors
It can be scary contacting creditors, but you will find that many of them are extremely helpful if you just call them. If you explain your situation and that you’re so over-committed that you’re no longer able to keep up repayments there are other options. Many will offer repayment options and even freeze interest rates so that everything you pay will be chipping away at the debt and not just going on interest.
Speak To a Debt Management Company or Charity
If you’re nervous about speaking to creditors or need to consider other options such as IVAs and bankruptcy, it’s worth contacting a debt company. They will be able to give you impartial advice and get you set up on a plan that best suits your situation. They will contact creditors on your behalf and help you sort repayments, and generally guide you and let you know what to do.
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