How to Help Yourself Get Out of Debt

| December 14, 2012
How to Help Yourself Get Out of Debt

How to Help Yourself Get Out of Debt

When you get into debt, the worst thing that you can do is pretend that it is not happening. You need to look at your bank statements, credit card statements and balances on a regular basis so that you know just how bad it is. This will help to prevent it from spiral out of control to the point of bankruptcy. There are a number of things that you can do to help yourself get out of debt and on the way to financial freedom.

Budget and Start Clearing the Debt

Set yourself a budget. This is very easy to do with a spreadsheet. For the first month, track your income and the regular outgoings that you have. This will help you see the amount of disposable income that you have. You can then see how you spend that disposable income each month. The second month, set up a budget. Using last month’s figures, work out the amount that you have coming in and the amount that you will spend. You can then use the disposable income to clear your debts.

Work on the smallest debt first. As you see one debt cleared, you will have a boost of confidence that you can clear the rest. While making larger payments on the one debt, make the minimum payments on the other debts to avoid getting into trouble with your creditors. Once you clear the first debt, start on the second. If you have debts that are around the same, you will be best choosing the one with the highest rate of interest, which will avoid paying too much extra.

Once you clear your debts, put the money that you would have spent into some savings. This will give you the emergency backup that you need should something happen or if you decide that you want to splash out on luxury. You will have more freedom with your money.

Consolidate Your Debts into a Loan

If you struggle to budget and clear each debt off at a time, look at consolidating all of your debts into one personal loan. You will need to talk to your bank or a lender about a long term loan for the same amount as your debts. Once you are approved – and this is not guaranteed – you will use the money to clear your debts. Then you will need to pay off the loan with the repayment plan agreed when signing.

This will help you manage your debt when you struggle. You will only have one payment a month and it will usually be less than the amount that you spend on your separate debts. Many benefit from this because they have a set time that they will be out of debt and find that they spend less in the long term due to lower interest rates.

Look into Debt Management

This is something that people with large unsecured debts often choose. You will need to talk to a debt advice company about this option as they will need to look into your finances and determine the amount that you can reasonably pay each month; taking into account your income and outgoings. They will set up a plan, usually around 36 months, and you will pay an agreed amount each month.

The company will contact your creditors for you and help freeze the amount you owe – meaning that many of your credit cards and store cards will be cancelled. You may find that you pay much less, sometimes finding that 40% of the debt is wiped out.

There are different options available to help get you out of debt. Doing it yourself will mean that you have the benefit of doing less damage to your credit rating. However, it is better to ask for help instead of struggling and landing in bankruptcy.

Author bio:

Carlos has been working in finance for 6 years and offers advice to many people on their debt management. He now writes to share his advice with many others in hope that they will be able to find financial freedom.

How to Help Yourself Get Out of Debt

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