Pointers to Help With Credit Problems
Once you have decided that you are definitely going to make a considerable effort to lower the amount you owe in debts the first thing you will need to realise is that you do not need to accumulate any more debts.
So it is essential that you cut back on your spending, especially the non-essential luxury type of spending on all kinds of goods and services especially those that involve the use of your credit cards.
Get into the habit of only buying what you can pay for by cheque or cash, also bearing in mind the following pointers on dealing with your debts:
1. Be thorough and honest in detailing your income and expenditure: In maximizing the handling of your expenditure you will be clear on where you need to apportion your income.
You will be able to prioritize your essential expenses and will be able to clarify where you will be able to reroute money to pay off your debts. You also need to understand that unless you somehow make more than 12% interest on your savings you will “earn” more by paying off your debts (which may charge between 12% and 24% annual interest) rather than leaving the money in the bank.
Did you know that you can take 21 years and 11 months to pay a balance of £1750.00 on a credit card with 18% interest if you pay only the minimum monthly payment? This means that the total interest paid over that term would total around £3647.00.
If you were to allocate an additional £25 towards your monthly payment you would eliminate nearly 19 years of that debt. This would mean a saving of £3059.00 due to this reduction in interest.
2. The objective is to reduce the financial cost of debt (the amount of the payment that is going to cancel out the interest) and contribute more to the payment of the capital. Consequently, the period of time you are in debt is shortened and the repayments are speeded up.
Compile a list of your debts, making a note of minimum monthly payments and rates of interest; compare interest rates and then transfer those balances to which you pay the most interest.
Manage your money by transferring debts with high interest rates to somewhere with the capacity for lower rates: e.g. credit cards with promotional interest rates.
Find out if there are other sources of funding to pay your debts more effectively. An alternative could be your life insurance with cash values on the interest accrued at a rate of 6% or less.
3. It is worthwhile considering housing all of your debt in one location. That is, if you must combine in a single loan all your debts as collateral by delivering the equity in your home.
4. Inform your creditors immediately if you will struggle to make prompt payments for a prolonged length of time. Explain the difficulties you’re experiencing and your determination to fulfil your obligations; they may well be willing to help, as it often suits them to do so.
5. Make use of the services of credit counsellors when you cannot personally handle your debt problems.
6. For some the only solution is to seek protection under the law through bankruptcy, it is not pleasant but it is something that some people have to face up to.
7. Be aware of the laws that protect your credit rights: it is important in terms of preventing abuse by creditors.