It happens to the best of us. We splash out on that vacation, buy a new car when we really can’t afford it, or rack up big bills eating out and purchasing all those little luxuries that make life seem sweet. Soon, we’re not clearing off our credit card balances each month, and we seem to fall further and further behind. At some point, our debt gets to the level where we are struggling to meet the bills each month, and we can’t pay for the necessities – let alone any luxuries.
If you are in this situation, the hard truth is that there are only two ways to get your debt under control. You can spend less or find ways to reduce the amount you pay to service your debt. In fact, it is probably a good idea to pursue both of these strategies if you want to get out of debt as quickly as possible.
Let’s start with reducing the cost of servicing debt. Credit cards are one of the most expensive ways to borrow money, and yet they are probably the most common way that we get into debt. If your credit is still good, consider taking out a loan at a lower rate to clear your credit card balances. To get the lowest rate, you need to get a secured loan – for example, by remortgaging your home – but even if you get an unsecured personal loan, you will end up paying less than you do for your monthly credit card bills. Not only that, the amount you owe will go down in time, rather than just keeping up with the interest charges.
Of course, you may think you just have a short-term problem. In this case, it can be very tempting to get a quick cash loan from a payday lender to get you over the crisis. However, before you do this, be aware that you are going to pay very high interest rates, so this isn’t a solution for more than a few weeks. Instead, consider asking a family member to advance you the amount using a money transfer service such as Trans-Fast.
When it comes to reducing expenditures, the most important thing you can do is to make a budget and stick to it. List everything that you spend in a month – not just accommodation, groceries, transportation and utilities. The little expenditures are the ones that you can control most easily, whereas it’s pretty difficult to cut down on mortgage or rent payments. Individually, the amounts may not seem like much, but if you cook at home rather than eating out, only drive when you need to, downgrade to a basic cable service and so on, it will all add up.
If you find you are struggling to put a good plan in place, then go and get expert assistance. There are a number of free nonprofit credit counseling agencies that can help you to budget your money and pay your bills. They can even reduce your debt payments by negotiating a debt management plan with your creditors. Just be aware that if you do set up a debt management plan, this can affect your credit rating.