The problem with debt is that it’s so easy to get into, but so hard to get out of. Lending can be a slippery slope, which can catch out even the most careful people. Whether it was a result of poor planning, or you had to borrow money to deal with an emergency, it’s a situation that no one wants to be in. If you have ‘get out of debt’ jotted on your 2020 resolution list, here’s what you need to do.
1. Use your savings.
It’s tempting to want to keep hold of your savings, however, if you have debt and savings at the same time then the best thing to do is to use them. This is because being in debt is expensive, every month you’re being charged interest which is costing you money. Use any money you have saved to bring down balances, ideally pay them off completely. If your debt is older then your creditor might even be willing to accept a reduced payment to clear off the remaining amount. This will have a slight negative impact on your credit score, but means they will no longer chase you for the debt and you can use the money you save towards getting other things paid off. Other things you could consider would be selling items you no longer need to raise cash. Or if you have got into debt as a result of someone else’s negligence, a personal injury attorney could claim you the money you’re entitled to which you could use to pay things off.
2. Speak to your creditors.
If you’re not in the fortunate position of having savings to pay off debts and you’re struggling to make ends meet, you’ll need to talk to your creditors. It can seem scary but if you explain the situation then there are often things they can do. They’ll be aware that they can’t get blood out of a stone, they’ll usually ask you to fill in an expeditures and income form to get an idea of your financial position. From there they can suggest things like reduced payments and other options which might be suitable for you both. It could even be something as simple as a temporary break in your payments while you get back on your feet.
3. Consider a debt management plan.
If your creditors tell you there’s nothing they can do, or you have numerous debts which you’re struggling to get a handle on then a debt management plan is a good way to go. These are agencies or charities who can contact creditors on your behalf, and arrange things like reduced payments which are affordable for you. They can often get interest frozen so that it is no longer accumulating and you debts are no longer spiraling out of control. You can then work on getting the balances down without getting further and further into debt, and eventually have everything paid off and be debt free.