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Choosing a debt solution needn’t be difficult. You can research your options either online using sources, such as crediful. Or you may want to discuss your debt with a credit counselor.
To help reach your plant of action, this post gives you a brief breakdown of three solutions that might work for you these are; personal finance management, debt consolidation, and bankruptcy.
Personal Finance Management
Depending on the size of your debt, your income and outgoings, you may not need to turn to relatives, debt management companies, or bankruptcy to help solve your money problems.
By taking some time to jot down and assess your finances, you can determine the following;
- Whether you can make cutbacks on your outgoings. For example, change electric and gas providers, reduce your food shopping bill, your clothes allowance, and entertainment budget, etc. In doing so, you could make savings and increase your debt repayment amounts to pay off your debt sooner.
- Can you increase your income? Is there a possibility of a promotion at work, a pay rise, or could you make a side income to fend off your debts quickly? Along with cutting back your expenses, increasing your take-home pay means you can allocate more money to your debts.
- What are your priority debts? These are urgent debts that need to be paid to avoid losing necessities. For instance, mortgage arrears are considered a priority to prevent your home from being repossessed. Other less urgent debts are paying off your entire mortgage asap. Because, as long as you keep up with your mortgage payments, your mortgage is considered a “good debt”. ”Bad debts” you shall want to pay off are depreciating assets. Particularly those with high-interest rates such as a TV on finance or a car loan.
When handling your debt, it helps to know where you stand with your finances, what can be improved and what debts you have right now that require your urgent attention.
Debt Consolidation
If you have debts from multiple finance companies, banks, and creditors, you may want to consider consolidating these with a debt management company.
For this option, the debt consolidation company aims to purchase your debt from your lenders. In turn, you pay one manageable regular payment to the debt management company until the debt is cleared.
This is a simpler way of repaying debts. As opposed to the overwhelming prospect of paying multiple banks and loan companies. In some instances, you may be able to pay a reduced amount.
Declare Bankruptcy
Picture by Melinda Gimpel from Unsplash
If repaying your debts is impossible, the last option to consider is bankruptcy. If you declare yourself bankrupt, your assets and belongings will be sold and used to pay off the companies you owe money to. It’s critical to take time thinking about whether bankruptcy is right for you.
Bankruptcy can remain on your credit file for the next decade! The impact of bankruptcy is known for preventing people from purchasing a home. Plus it can also damage the prospect of gaining employment.
The majority of US citizens carry debt, referred to as good debt and bad debt. Good debt includes, for example, student loans and mortgages.
These debts are to an extent considered an investment with value, that may in the future yield a substantial return. And bad debt such as credit card debts and payday loans is debt for depreciating items, payday loans or money borrowed with high-interest rates.
Determine what debts are urgent for you to solve, and write down why and how it impacts your life. Not just right now, but also how it will affect your future and that of your family if you don’t control it now.
Look at the benefits of clearing your debt. For instance, if you clear debt now, you may be able to get a mortgage to buy your dream home in a few years.
Also, by working out when your debts shall be paid off, you will have more of your income back to spend on what you want, as opposed to paying down debt. Keeping a note of your motivating factors will help you to persevere and pay off your debt entirely.
Are you looking to refinance or purchase a home? Check here for a mortgage loan that’s right for you for new home purchases, refinancing, and new home construction.