Not many people can say that they are completely free of debt. Although they may not have loans or credit cards, people often forget that their vehicles, as well as their houses, are a form of debt. In those cases, however, they are a ‘good’ form of debt so to speak.
That does not mean that a credit card or a loan is necessarily a bad thing, but it must be managed properly or debt can spiral out of control. In this article, we will explore ways that people can deal with debt, especially if you are falling deeper and deeper into it.
The signs of debt becoming a problem
Debt takes time to become a serious problem. There are a number of warning signs. These include:
• Borrowing money to pay off accounts or to other people you have lent from
• Paying for bills and groceries by credit card
• Exceeding your overdraft limit on regular occasions
• Getting charged penalty fees for direct debits that have not been paid
Once you notice even one of these happening regularly, your debt might be starting to become a problem. It is time to act! Begin with a proper budget totaling your income versus your expenditure. When you do this, you will be amazed to see how much money you actually waste over a month. You may also notice that your expenditure, therefore, is way more than your income. Writing this down is often the only way for us to see that we are falling deeper and deeper into the debt trap.
Time for a change!
Now is the time to act and not panic! Getting your debt under control is no quick-fix solution. It requires planning. Start with getting some professional financial advice. Although this may seem embarrassing, there are people that specialize in helping those who are in debt. Not only can they guide you, but the will give you a measured, informed view.
Depending on the level of your debt, you may need to enter into one of the following agreements.
This really should be a last resort. Here you will lose any assets you have including your house and vehicles. These will be used to pay any creditors that you owe money to.
• Individual voluntary arrangement
This is a deal that is struck between yourself and any creditors, usually under the auspices of an insolvency expert. Here you will pay off your debts over a number of years.
• Debt relief orders
If you have debts of less than £15,000 and no assets, your debt may be written off without the need to file for bankruptcy.
Of course, you need to tackle your spending and cut down on unnecessary purchases. Another possible solution is debt consolidation. This means applying for an unsecured loan (especially if you have a bad credit report) and using it to pay off certain portions of your debt. This can help lower the income versus expenditure ratio, allowing you to live more easily between paychecks. A debt consolidation loan, coupled with checks on spending can help you get out of debt over time.
Whichever route you choose to follow, if you are showing signs of debt, it is time to act now!