| Martine Sicard |
By Lyn Bell
As the credit crunch bites and recession follows the question of how to get out of
more and more people are asking debt. Many have lost their jobs in the current
recession, while others may have had a long time off work through sickness. Hours
may have been reduced. Resulting in less income. Opportunities to work overtime
may have dried up.
It is so easy to get into debt when you go through a bad financial patch. The credit
card balance mounts up. You take out a loan thinking that things will soon be back
to normal and you can then pay everything off, but so often it turns out not to be so
easy. You may be unable to find another job, or your company reduces your hours
permanently.
Even if the situation is resolved and your income goes up again, often the debt is
not as easy to pay off as you expected. Here are a few steps to help get you started.
- Do a budget! This is the best place to start to sort your finances.
- Keep making your monthly payments on time. Make sure you budget for it and
do not use this money for spending. - Pay the highest interest debts off fastest.
- Cut up your credit cards or at the very least put them in a safe place but not
in your purse. - • If you receive a windfall such as a cash gift or an inheritance pay this off
debt. Do not spend it! - If these strategies are not working for you, there are several things you can
do. - Debt Consolidation is a way of repaying a lot of small loans or credit card
debts with one large loan. Payments can be cheaper each month and will help
you to keep track of all your debts. A word of caution though: Do not start
accumulating more debt because the pressure has come off. This
unfortunately is an easy trap to get into. - Negotiate the terms of your loans with the lender. Arrange for a longer period
to pay. This will make your monthly payments smaller. Be truthful with the
lender and explain your situation. If you are making an effort this is seen in a
favorable light. - Apply for a 'payment holiday' if you cannot make your payment this month.
Remember that interest will still be accruing. - Bankruptcy is really a last resort and should not be taken lightly. Bankruptcy
can be voluntary (where you initiate it) or forced (where you have a court
judgment against you). In bankruptcy proceedings you lose all your assets
and you will find it very hard to get credit for many years to come. In terms of
how to get out of debt, this is certainly not the best way, but sometimes some
people have to resort to it.
The best answer on how to get out of debt is to take stock of your situation and be
realistic about what you need to do to make things right. Speak to your bank or
credit card provider. If you need extra help seek it out with a budget advisor or
financial planner.
For more on debt reduction please visit Lyn's website SoundFinance
How to Get Out of Debt in Hard Times
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