A Systematic guide towards dealing with debt problems

If you are worried about your increasing debts and their repayment options, then relax and be assured that you are not alone. You need to understand that dealing with debt problems requires a systematic approach and a quick action. The below are few tips that can help you organize your debt and approach towards an effective solution.

Tip#1: Act fast
Remember to deal with you debt problems at the first sight of alarm and never ignore them. The more you delay, the more your debt problems will worsen. Look out for options and guide on how to cope and where to get advice.

Tip#2: List your debts
The list of people and the amount of money needs to be listed in a systematic manner. This helps you get a fair glance at your current situation and the required monthly amount of money for these payments. This kind of list also helps when we tend to forget few creditors whom we owe a comparatively lesser amount. So remember to prepare your creditor list when you start looking at your debt problems.

Tip#3: Arrange the debt list
Once you have listed all your debts, take time to arrange them in a priority manner. Priority of debts depends on the seriousness that can be caused due to payment default. As an example, loan on an asset that can lead to risk of losing it due to non-payment of debts is a priority debt. Priority debts normally include repayments on assets, mortgage debts, rental dues, taxes, utility bills and court fines. Once you have listed these high priority dues, the other least priority debts can be sorted by the amount that needs to be paid. Prioritizing these in the second level does not reduce their importance but makes you organize and focus on the risky ones first. The non-priority debts include repayments of cards, overdrafts and bank loans, catalogue repayments, home collected credit repayments and money that has been borrowed from friends and relatives.

Tip #4: Prepare a budget
It is important that you plan the amount of money you can repay you creditors on a monthly level. You can prepare a budget that includes all your scheduled expenses for a week or a month and then stick to it accordingly. This way of preparing a budget will help you analyse your spending pattern and enables saving of money by cutting on unimportant things. If you find it difficult to do it yourself, you can find many free online budget planners to aid you in this.

Tip #5: Get help to deal debts in different ways
In case your monthly savings calculated based on your weekly or monthly budget is not sufficient enough to manage your debts, then get help or advice on the other different ways involved in dealing with these debts. There are many different ways of resolving these debts that include methods like debt consolidation and informal arrangements that can be used effectively. These methods might help you with less interest rates, low repayment amount and extended terms of repayment. There are many agencies and websites that provide help on these matters. Check carefully before you opt for one as some agencies might charge you for their services.

Tip #6: Negotiate with your creditors
It is important that you keep your creditors informed of your financial situation. One method of dealing with debts is to strike a negotiation with your creditor for an amount you can afford to pay monthly or for extension of terms. Sometimes even an extended deadline might help in procuring the required liquidity for payment. You can plan to enter into an informal agreement based on acceptance from your creditors for change in the amount of money that you can repay. Always stick to a letter confirmation after any kind of agreement, as informal discussion pose risk of abrupt changes to the negotiation terms. You can even get help from an insolvency expert to aid in meetings and appointments with the creditor if you are planning it the legal way.

Tip #7: Maintain agreed terms and conditions
Try to maintain commitments and agreed payments as per any terms of negotiations. The regularity in your payments might help reduce more debts by further talks with the creditors. A considerably good credit history might help you even with debt consolidation loans at a lower rate of interest.

These are the basics of solving your debt problems and the sooner you work towards a solution; the easier it would be to resolve things. You can at any time go in for independent advice from an expert who can guide you to the best solution based on your current financial income and debts. You can resort to organizations like Citizens Advice and National Debtline for free help and advice.

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