A look at your options for managing multiple debts

Posted on October 29, 2009 @ 11:18 am

After years of careless lending and borrowing we have all woken up to the problems of debt. To some it seemed obvious that we could not go on expecting the cost of houses to continue rising at several percentage points each month. A financial crash was sure to happen because so much borrowed money was secured on the assumed rising value of property and when borrowers reached their borrowing limits it all came crashing down.

Now, we have so many people who have debts they can’t deal with and they need debt problem help. They are struggling to make their monthly repayments and have little chance of paying off their debts. It is a difficult situation for anyone to find themselves in and it is not always through careless or thoughtless actions. Life throws things at you and ill health, redundancy and divorce are very common reasons why people start to struggle with what are now overwhelming debt repayments.

Any of us could wake up one day and face these problems and if that day arrives we will be looking for some help from somewhere. Bankruptcy may be an option to wipe away your debts but your record will show a poor credit score and it can continue for up to ten years. This will probably prevent you from obtaining credit when you need it in the future. So rather than filing for bankruptcy you might want to consider some other options to assist with a credit fix and personal debt relief.

Debt consolidation loans are usually the first thing people think of when they need to deal with their debts. Getting a loan usually requires you to have a significant amount of your own money invested in the property used for security. Figuring out how much you need to borrow is simply done by adding up all your outstanding debts. Over the years you might have got yourself several different types of loan as well as your credit card debts. Next you need to know how much your current monthly payments are. You should find that the repayments on your consolidated loan work out to be about the same or even less than the previous figure. A consolidation loans biggest benefit is usually that the interest rates are lower and over time you should end up paying much less in interest charges on your debt. You repayments should work out to be less than you were paying before and you only have to make one payment each month which makes managing your money a whole lot easier.

An alternative option is to work with a debt relief agency to sort out your debts. Your creditors will be contacted by the agency and they will make an arrangement to pay lower monthly repayments. Each month you will have a predetermined amount you have to pay them. A monthly payment will be required and from this they will make payments to all your different creditors each month. You can do pretty much all of this yourself if you want to but most people seem to prefer having professionals doing it for them.

You only have to make the one repayment if you decide to go with a debt relief agency. So it becomes a lot simpler because each month you now only have to send one repayment instead of individual ones for each of your creditors.

Make sure you understand what got you into financial difficulties so you never do the same thing again in the future. If your financial problems were caused by credit cards the wisest thing would be to cut them all up. For anyone who is really serious about managing their finances and their debts dramatic moves like this can be a big help.

If you feel it is important you can keep one card and only use it in emergency situations. One way of doing this but avoiding temptation is to store the card in a safe yet out of the way place. One great trick is to freeze it in a block of ice. This way works because you have to wait for the ice to melt before you get access to your card if you store it in ice. This way you will get the time you need to decide if you really do want to use your credit card. Now this may seem rather an extreme thing to be doing but if you are someone who has in the past had problems with overspending this can help you control that problem.

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