Being deep in debt can be one of the most suffocating feelings, as you feel constant pressure from lenders and worry about not making sufficient repayments. Getting out of debt as quickly as possible will be a priority, so here are six things you can do to start the process of clearing your debts.
List your debts
The worst thing you can do with your debt is to hide and run from it. Confronting the amount of money you owe in total and to each lender will help you to make a sturdy payback plan. Writing down all of the money you owe might not be the most fun activity, but having it all down in front of you can put it in perspective and allow you to start prioritising and budgeting.
Some debts are more urgent than others, and those aren’t always the biggest amounts. You could have huge credit card bills, but these can be put second place to more important payments such as those linked to your home. If you are behind on mortgage payments, these should take a solid first place when looking at repayments. The consequences of not paying toward your mortgage can be severe, which could lead to your home being repossessed. Other debts to prioritise are those that could eventually bring about legal action against you, from large fines to court orders.
Manage a budget
Once you have worked out how much you will be paying toward each lender each month, you can begin budgeting. Calculate how much will be left over from your income after basic living costs and minimum payments towards your debt. Anything left over can either be put aside as emergency funds in a savings account, or can help you pay off debts a little faster. Paying more than the minimum on your debts can speed up the repayment plan and help you to be debt-free much faster.
Change your credit card
If you are in credit card debt, check to see if you are currently paying interest on your debt. If so, consider switching to a 0% balance transfer credit card. The bank may charge you a balance transfer fee, however you won’t be charged interest on your new credit card balance for a set period of time.
Make at least minimum payments
When you are deciding on a weekly or monthly budget, take into account the minimum payments for every debt you owe. By paying below or only the minimum you could be ruining your credit score and also dragging out the debt further. If your finances allow, pay just above the minimum to not only speed up your debt eradication, but also show lenders that you are able to balance your payments and finances well, which will boost your credit rating.
Call your lenders
If your current repayment plan is too out of reach, speak to your lender to make rearrangements. You can try to agree on extending the amount of time you have to pay back what you owe, or settling on a lower repayment amount each month. Speaking to the lender can not only put you at ease about your debt, but will also keep them off your back, so you’re less likely to be hounded by calls and letters about your debt. Make them aware that you have every intention of paying back what you owe, and outline a clear, fair plan on doing so.