The first step to getting your debt problem under controls is recognizing that you have one. Like any other problem, admitting is the key to turning your situation around. Here are some strategies to implement and follow through to avoid being “gobbled up by the Debt Monster”.
If you are in a position of excessive debt the first thing to do is stop spending on credit. Destroy you credit cards and store cards. If you have no money to buy it – it is not bought. Forget about your interest free offers and buy now and pay tomorrow. This is a trap that someone who is already carrying excessive debt should avoid. Get yourself a debt card. This way you only spend that money that is in your account and which you can afford to spend.
Write down your debts and their periodic cost (ie. interest cost of the debt and set periodic repayments) . Prioritize these from most expensive to least expensive.
Set a budget – listing all your income sources and all your expenses. If expenses exceed income – you are living beyond your means and this is likely to end badly. Your budget should allow for repayment of all debts as well as cost of living (rental, mortgage, utilities etc)
There may be scope to put several more expensive debts into a single debt. One great example of debt consolidation for people who are home owners, is the consolidation of high cost unsecured debts into a home loan. Even if your credit history s tarnished the cost of your mortgage should be significantly lower than that of credit cards. providing you have the equity in your property and sufficient income to qualify for a mortgage refinance this can be a very effective form of debt consolidation.
If you are not a home owner, you will not be able to qualify for an unsecured personal loan for debt consolidation with a poor credit history. These generally require a clean credit history.
You may however find that a Debt Agreement is a solution that helps you gain control over your debts and slowly pay them down. This is a consolidation solution for people who are unable to afford their current unsecured debts and are falling further behind. If you are facing such a dilemma, a debt agreement can help you negotiate down your level of debt, reduce monthly repayments and come out of the agreement in a few years free of debt.
It is important that you identify your most expensive debt and apply all available funds to paying this debt down, then your move to your next most expensive debt and so on. This strategy can take a number of years but should help you lose your debt problems for good.