Given the general economic depression and the mismatch between income and expenditure, most people think that once they have become ensnared in a debt trap, they can never get out of it. However, difficult as it may seem, getting out of debt without having for file for bankruptcy, is very much possible. You should be ready to undergo a few elementary steps to assess your financial situation and practice financial discipline.
Ascertain the Extent of Your Debt
Strangely enough, all that many people know about their debt is that they never seem to have enough money to pay the minimum monthly payment due on their credit cards. Even though, you may find it difficult to decipher credit card statements, you need to hunker down and make a list of all that you owe your creditors. Your list should ideally contain the amounts due, the monthly payment amount and the rate of interest applicable. The list needs to be of all creditors, including the house mortgage and the car loan. Calculating the amount that you need to pay every month and adding it to your monthly expenditure will tell you the extent of the mismatch with your income.
Curbing Your Expenses
Most people clearly have no idea what happens to their monthly income. Analyzing your expenditures over a few months is a very good way of finding out if you have been spending on the essentials or frittering it away on impulse buys. There’s always room for improvement so take a hard look at your lifestyle and cut out those expensive dinners, holidays, and buying gifts. Lock up your credit cards and carry cash only to buy stuff. You will soon see that you are managing to save anywhere between 20% to double that when faced with the pain of purchasing with real bank notes.
Prioritize Your Objectives
Since it may be impossible for you to pay off all your credit card dues in double-quick time even after curbing frivolous expenses, you need to decide which debts are to be paid off first. You could tackle the cards with small outstanding and clean them up completely before tackling the cards on which there are large dues. This can give you an added confidence that you can rally take command of your debts. Do remember, however cards with large dues are the ones that are attracting heavy interest and penalties, so paying them off first could actually help more.
Negotiate and Consolidate
If you are like most people, then you would have trouble in tacking the mountain of statements every month and figuring out how much to pay on some and which ones to be skipped. The first thing you could attempt is to call up all your credit card issuers and explain them your financial distress and ask for the penalties to be waived and the APR to be reduced to a level that can ensure you are able to make the monthly payments. Examine the possibility of making balance transfers of large outstanding on a card to another that has a lesser APR. If you are hassled by multiple bills, then it may be wise to look at debt consolidation so that you can focus on paying only one bill in a month.
Debt Settlement – A Viable Option to Bankruptcy
If there is a serious mismatch between you income and the monthly dues of the accumulated debt, then you need to take quick action before the credit card issuers transfer it to collection agencies. You can approach the card issuers with whom you have a bad payment record and substantial dues with an offer for a settlement of the entire dues by paying around 30%. If the card company genuinely believes that you are a very bad credit risk, it will agree to waive off substantial chunks of your dues with some bargaining. A good way of achieving handsome settlements is to seek the intervention of a reputed debt settlement company. Learn more about the pros and cons of debt relief on NationalDebtRelief.com.