Short Term Debt Problems - Take Control
Short term debt problems are manageable problems associated with
temporary job loss, sickness, a large one off payment which may
leave you short for a month or two or you just have a lot of
small out of order debts, which you need to take control of.
Below are just a few things to take into consideration when
evaluating your credit situation.
Prioritise your Payments
Prioritizing your payments is a very important step. You must
choose the creditors that are most important to you e.g. your
mortgage payment and your utility companies.
Next are the credit cards and store cards which charge the most
interest, by paying off the cards with the most interest you can
reduce the amount of interest calculated on your next bill.
Try to clear some of the smaller bills first. Although it seems
like there is not a lot of interest amounts being paid on them,
it still adds up. Clearing some of your smaller debts gives you
encouragement to set to work on the others.
Transferring your credit card balance onto another card, with a
0% interest period is also a recommended action. This allows the
full monthly payment to be deducted from your balance, without
incurring any interest.
Always remember to pay off your debt with any available money
you may have at the end of each week/month. Doing so prevents
any arrears and a build-up of interest on credit cards and store
cards.
Can you improve?
Improving your situation is one of the best ways to acquire
extra money. Try to think of ways to maximize your full income
e.g. is it possible for you to work more overtime, can you claim
any benefits, and do you have anything of value to sell? Also
can you afford to cut back more? A drastic measure is to move to
a smaller house and pay less mortgage or less rent, however this
is a worst case scenario.
Contact your creditors
If you are experiencing money problems, do not be afraid to
contact your creditors as they will try to help you. Due to the
process the creditors have to go through to get money from you
if you do fall into serious money problems, it can work out
quite expensive to your creditors. Contacting them could lead to
negotiating a new payment plan.
Before contacting your creditors, make a comprehensive list of
all the outgoings and a realistic amount that you can pay each
month. After you have completed a list of out goings, make a
list of all creditors remembering to prioritize from most
important to least important. Upon completion of this list,
prepare a formal letter explaining your situation and proposing
your payment plan.
When you receive confirmation/acceptance of your proposed plan
(or something close to it) always keep your creditors informed
of your progress. This process is a long drawn out process and
you will have to prove to your creditors that you are struggling
with the upkeep of your payments.
Cut backs
You will be surprised on what you can save on when you cut back.
Make a list of all of your current out goings, this includes all
your shopping, hobbies, magazines, news papers, treats,
everything. When you have produced your list, take a look at it
and remove all essentials
>From this list also look at the brands of shopping you buy, you
can save money buy using a cheaper brand.
The items you have left on your list are obviously non essential
to you, therefore can be excluded from your weekly/monthly
expenditure. You will be surprised to see how much you can save
from this simple money saving technique. However you do have to
be tough on yourself when excluding non essential things, think
to yourself “do I really need it.”
Choose the best rates
If you still have a good credit score and still have the ability
to be accepted for a loan, then try switching your outstanding
credit to a new loan or credit card.
Search the internet, local papers and magazines, even keep an
eye on the adverts on your TV, there are hundreds of creditors
offering 0% interest on credit cards. Try doing the same for
loans too. It is very unlikely you will find a 0% interest loan,
however there a lot out there with rates from 5-9%.
Switching credit cards and loans will save you money on
increased interest rates. Look at the big picture over the long
term; you will save £100s on interest.
Consolidate through your mortgage
It is possible for you to consolidate your debt on to your
mortgage. However doing so does increase the interest you will
pay drastically. Imagine you have debts of £10,000 over a five
year period. You wish to add this to your mortgage over a period
of twenty years. The interest accumulated over five years will
be significantly less than the accumulated interest over twenty
years.
You must also be sure that the value of your property is
significantly more than the amount of your mortgage. Negative
equity on your home can lead to problems. Consolidate with a loan
Consolidate through a loan. Quite like putting all your eggs in
one basket so to speak. Then there are a few scenarios you may
want to consider:
* How much do I want to pay out? * Do I want to take the loan
over a shorter term and pay my debt back faster? * Do I want to
take my debt over a longer term, pay more interest but take a
lower payment? * Am I going to stick to the loan and not get
into more debt? If you are aware of these simple scenarios then
a consolidation loan is recommended. It is cheaper due to one
amount of interest paid instead of multiple amounts. Also you
will find your money easier to manage due to the one single
payment every month/week.
Do pay particular attention to the term of the loan you require,
it is better to pay the loan back sooner rather than later. Try
to find an amount you are comfortable with. It is easy to take
the lower payment over the longer term, which allows you to have
more expenditure. However, is this option a sensible one? More
interest, longer term, more to pay back. You would be better
with shorter term, less interest, less to pay back.
About the Author
Article supplied by Baymaster. For a complete and extensive
guide to debt consolidation, please visit our web site at
http://www.debtconsolidation.informatee.com
