What should you do when you’re in the middle of a debt crisis? Anyone can be caught up in debt problems and knowing what to do can make a big difference.
Below are the steps on how to deal with debt crisis the right way.
How much do you owe.
People who are already in debt can make matters worse by refusing to acknowledge the problem. Instead of taking immediate action, some people choose to ignore calls from their creditors or refuse to even look at their billing statements. But the best way to deal with debt is to face them. Are you aware of how much you owe your creditors?
The first step in dealing with debt crisis to get a copy of your personal credit report and analyze your accounts with your creditors. Make sure that all charges on your credit report are accurate. In case there are errors, call the creditor right away to dispute the matter. Next, calculate the total debt you owe so you can start creating an efficient repayment plan.
Talk to your creditors.
Speak to your creditors instead of hiding from them. Don’t be afraid to admit that you’re having difficulty in keeping up with your payments. Show your creditors that you are willing to take on your obligations and that any help they can extend is all you need. Explain your financial situation and try to negotiate an easier repayment term. For instance, how much can you afford to pay each month? Most lenders would be willing to make adjustments on your behalf especially if your record shows that you’ve been a trusted client of the company for a long time.
Don’t panic.
Regardless of how much or how big your debt crisis is, keep in mind that there is always a way out. If you don’t know what to do, don’t hesitate to get help from a legal and legitimate credit counseling agency. A credit counselor would be able to advise you of the specific strategies that you can do to solve your debt problems one step at a time.
What about debt consolidation?
In extreme cases, your credit counseling agency may suggest debt consolidation. Remember, acquiring a debt consolidation loan is not a quick and instant solution to your debt problems. It’s a first step and in order to succeed, you’ll need to keep up with your monthly payments all throughout your loan’s term. Since a debt consolidation loan is secured with collateral, a single delay in payment can put you in a serious debt problem. Therefore, consider the consequences first before choosing debt consolidation.
Is bankruptcy necessary?
Your credit counselor would know if filing for bankruptcy is an option for you. Bankruptcy is often considered as a last resort and the most appropriate solution. If bankruptcy is necessary, bear in mind that it’s not the end of everything. As soon as you’ve been discharged from your debts, you can immediately start building a new and better credit history.
Change of lifestyle.
Regardless of how you choose to solve your debt problems, the only way to be free from debts and stay out of debt problem permanently is to make changes to your lifestyle. Pay more attention to your spending habits. What can you cut out? Calculate how much you spend each month and compare it with your monthly income. Have you been spending more than what you can afford? Discipline and motivation are important to successfully manage your finances. If you find it hard to make changes on your own, seek help from a legitimate credit counselor.
Have you stumbled into a debt hole or are on a brink of facing bankruptcy?
If yes, then it would be very difficult for you to get any type of loan approved. The best way is to rebuild your credit score. Though it sounds tricky, it is not as hard as you are thinking. There are number of ways in which you can rebuild credit, but you just need to make yourself aware about how you will do this. If you are able to learn necessary steps and technique, you will be able to quickly rebuild your credit. The following are some of the ways to rebuild your credit following a bankruptcy:
Take the benefits of a new credit card: The first step to improve your bad credit is to obtain a new card. With these cards, an amount of money which is equivalent to your credit limit is deposited by you with the bank or credit company much prior you receive the card. The reason for doing this is that if you are not able to pay your bill, the company will deduct it from your account. Once you show that you are regularly able to pay you bill, you can soon upgrade your regular card and the company would build a trust in you. The best part of secured credit card is that you get instant approval for credit but it requires small deposit to begin. But if you have messed you credit scores, this is quite difficult and risky as you would not like to put your assets as security deposits.
Make all your payments on time: With timely payment, you will be able to improve the effect of bankruptcy on your credit report. Few late payment or minor misses may affect your credit report a bit but major late payment or misses a bad impact which may hinder your recovery from poor credit. Again this is difficult as you are on the brink of bankruptcy.
Modify your personal budget and stick to it: One way is to create a monthly budget with main focus on controlling expenses and saving money. By making a habit of saving money and putting them in your bank account, you will not have to worry about money problems and will be able to pay on time. Again you cannot go beyond a certain limit; you can’t stop living after all!