It is natural that you will have some debts against your name just like any other individual. It is also natural that at some point to time you may find it difficult to cope with your debts, once again like many individuals.
In such situations, you will find that you are:
- Having trouble paying your monthly bills
- Receiving collection calls
- Getting legal notices from creditors and
- Worried about debt collectors may repossess your car or home.
However, when such a situation comes, do not fret as you are not alone. There are many people face such a financial crisis at some point or the other in their lives and for this they have no one else but the to blame.
Well, there may be a few unavoidable circumstances that may lead to such a situation such as:
- Personal or family illness
- Loss of job and others.
However, in most of the cases it is seen that such situations are created by the borrower themselves! They may:
- Overspend
- Not know how to manage their money and debt
- Be inconsiderate about their financial strength while taking out a loan
- Be duped with high interest rates and other loaning scams and others.
No matter whatever is the reason, facing debt crisis is always an overwhelming situation. However, the good news is that you can easily overcome situations. With a little bit of planning and diligence, your financial situation need not go from bad to worse!
Different options available
If you are in a financial hot water, there are a few options you can consider to get a relief from it. However, you must remember before you contemplate on the different options that none of these are fast remedies or easy to achieve. The different debt relief options are:
- Credit counseling by an expert and reputable counselor
- Debt settlement from a reliable organization such as debtquest
- Debt consolidation loan or
- Bankruptcy, as a desperate option.
The one you choose will depend on several different factors such as:
- The amount of your debt
- The level of your financial difficulty
- How disciplined you are and
- What are your prospects for the future?
However, all of these will have varied effects on your credit score as per their features. If you do not want that to happen and not reduce your chances of getting any loans in the future, you should be prudent enough to help yourself! This is the best options to choose wherein you should have and follow a clearly defined, meticulous and a strategic plan.
Develop a budget
The first step of self-help option for debt relief involves exercising caution while shopping for a loan and a loan provider. You must know about the rate of interest, the terms and conditions of the loan you take out so that you know exactly what to pay the creditor back every month. This will help you a great deal in making your future plans and following the other techniques of self-help in debt management and finance control.
Crafting and following a realistic and achievable budget is the next important step to follow. a carefully prepared budget will play a major role in taking control of your financial situation. It involves assessing realistically the amount of money you take in and the amount that you spend every month.
You must start with listing all your income from all different sources including salary, fixed deposit interest, rent and others if applicable.
Next you must assess all your expenses under two different heads such as:
- Fixed expenses: These will include the amounts that remain the same every month such as mortgage payments, car payments, insurance premiums, rent and others.
- Variable expenses: These will include your groceries, clothing, transportation, entertainment and others.
It may seem insignificant to write down all your expenses but in fact it will be very helpful to know and track your spending patterns, prioritize your expenses and curb those that are unnecessary.
Stick to basics and discipline
If you are in debt and struggling, your primary goal should be to stick to the basics and lead a disciplined life so that you can make the ends meet. These are:
- Housing
- Food
- Insurance
- Health care and
- Education
In order to support these expenses, you may have to curtail some of your variable expenses. This may be a bit difficult for you initially but over time and considering your ultimate goal to achieve financial freedom, it will seem easy and reasonable.
If you do not have much knowledge about budgeting and money management techniques, you will find a lot of info regarding this online, in bookstores and even at your public library. There are also several different computer software programs that can prove to be very useful to you for:
- Creating and maintaining a budget
- Creating proper and relevant plans
- Balancing your checkbook
- Making plans to save money and create an fund and
- Pay down your debt regularly.
When it comes to paying your monthly bills on time, there is no other alternative but to make your arrangements for the desired sum of money to pay at the earliest. It is only a realistic budget that will help you in this matter.
Contact your creditors
Now that you know about your cash inflow and outflow, you should contact your creditors immediately. This is the most significant step in self-help debt relief which most of the borrowers tend to ignore or delay.
In fact, if you are struggling with your debts and finding it difficult to make two ends meet, this meeting should be one of your top priorities. Tell them about:
- Your financial condition
- What are your difficulties
- Your plans and
- How much you can afford to pay every month.
More often than not, the creditors will be more than happy to help you out with a modified repayment schedule with reduced amount to make things more manageable for you. This will save your account from being handed over to a debt collector because if you delay, at a point, the creditors will give up on you.
Therefore, self-help is the best help in debt situations.
