A large number of consumers are entrapped in the debt maze today because the present economic set-up makes it easy for everyone to get loans. As people continue to delay payments, accrued interests soar up to make outstanding amounts much bigger than they ever expected them to be.
10. Get help from the Federal Trade Commission (FTC):
The Federal Trade Commission is no doubt one of the best sources for professional debt management assistance as well as valid information. A debtor should be well aware of his rights and that’s where the FTC can help a great deal.
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9. Negotiate with your creditor:
Creditors are willing to reduce the existing debt if you demonstrate your earnestness to make some lump-sum payments. A debtor can either negotiate for a lower interest rate or ask a creditor to clear off some outstanding dues in return for a series of quick payments. Debtors must not consider a deal as final unless they receive it in writing.
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8. Create a crisis fund:
A debtor can deal with unanticipated emergencies by creating a crisis fund. You will need to make regular additions to this crisis fund for at least 12-18 weeks. This crisis fund can shield your debt management plan from repeat defaults when abrupt and unexpected expenses come around.
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7. Focus on high interest debts first of all:
High interest debts should be your number one priority. A debtor should begin paying off these debts as early as possible. Soaring interests can make your debt management plan completely infeasible at the last moment.
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6. Do not use any credit cards:
In order to break free from the chains of a massive debt, you should immediately stop using credit cards. Plastic cards can only make you walk further deep in the debt maze. Instead of feeling tempted about making purchases that you cannot really afford, you should just try your best to keep all credit cards at home! When using a plastic card, you cannot actually see the real cash leaving your already burdened pockets. On the other hand, limited amount of money in your pockets will constantly motivate you to avoid unnecessary expenditures.
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5. Make the best use of mortgage breaks:
Many mortgage agreements permit a debtor to take short breaks from the usual repayment plan. Generally, this break in the repayment plan can last up to 15 weeks. You can work on strengthening your financial condition during this brief interval of about 3 months. This break won’t exempt you from paying off the loan amount or interests but you can easily settle an aching financial situation.
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4. Swap funds from low interest to high interest accounts:
Many debtors shop around to find bank loans or credit cards that offer a low interest rate. Funds from these low-interest accounts can be transferred to high interest credit cards that require immediate remedy. This technique is generally known as debt consolidation. The best advantage of debt consolidation is that you have to pay a lower debt in the long run. Also, you can easily focus on just one monthly payment instead of two, three or four.
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3. Keep a tight check on expenses:
The best way to keep a check on inattentive expenses is to prepare a budget. A debtor’s financial situation can only get worse if monthly expenses exceed the total income. Therefore, you must keep a detailed record of all monthly expenses. Every week, scan these records and point out avoidable expenditures. In the following weeks, you can restrain yourself from making unnecessary expenses.
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2. Maintain a good credit score:
A debt takes control of one’s life mostly due to a mounting interest amount. A lower credit score results in a higher interest rate and vice-versa. Over the long term, you will be paying a lot more than you can presently anticipate if your credit score is going down. Improving credit score amidst debt woes is a bit challenging but not impossible.
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1. Avoid borrowing more money:
Getting rid of a debt can slowly become a herculean task if you take more loans to pay off existing ones! In the long run, this strategy will only add more financial burden. Unless you are following a precise debt consolidation plan, there is no point of even contemplating such techniques. In most cases, banking institutions or private money-lenders tend to charge high interest rates from debtors.