Break Free from Debt with these Solutions

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Debt problems come to the surface in the early part of the year as the Christmas spending catches up on the store or credit cards and the January payday seems never to arrive. Debt, however, doesn’t just arrive. It is the consequence of a budgetary imbalance caused either by a drop in income or an excess of spending. Sometimes circumstances change over time meaning that what was once affordable is no longer so. That means a serious rethink on how to tackle debt problems and may mean getting some debt help from knowledgeable and reliable sources.

Budgeting your income and expenditure is a must. You have to get a clear understanding of what money you have coming in and, even more importantly, where that money goes to each month. Broad headings will not suffice and you need to have a detailed series of headings. For example, travelling costs covers a whole range of items from bus fares to petrol and car repairs. Getting into the detail will help you understand what items can be reduced and which ones have to be paid.

Essential items that must be paid are rent, mortgage, council tax and utility bills, although you should look for new tariff deals by using one of the many comparison websites. Even though these are essential costs, they can be attacked for savings. Speak to your mortgage provider and see if there is an option to extend the repayment term to reduce the monthly payment.

However, if you have a more long-term drop in income, you may need more radical and long-term debt help from your lenders.

Measures to be taken may include a debt consolidation loan or a formalised debt management plan. New loans are best applied for before you have payment problems and your credit history becomes adversely rated. That is why acting as early as possible to get on top of debt issues is vital in order to get the optimal outcome. If you have any spare equity in your home you may consider a secured loan rather than an unsecured one. The amount available will be greater and because the lender has collateral, the rate and terms should be better too.

If your debts are more serious, say in excess of 15,000, then you may wish to consider an Individual Voluntary Arrangement, (IVA.) IVAs were introduced fairly recently as a means of helping people with debt problems get back in control of their lives without having to declare themselves bankrupt. Debt help and advice on IVAs must be obtained through a licensed insolvency practitioner but the outcome can provide a road back to financial well being.

For more serious debt problems you may need more drastic action. This could include a debt consolidation loan whereby you use a new, lower rate longer-term repayment loan to pay off most of your existing expenditure on cards and other loans. Provided your credit rating is still good then you should be able to get an attractive rate of interest against which to borrow.

At the end of the IVA period any remaining debt will be written off by your lenders.

John Freeman has previously written articles for PayPlan who deal with bankruptcy and debt management etc.

Filed under Bad Credit Loans, Debt, General by on #

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