Personal Debt Problem
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A personal debt problem can lead to harassing phone calls from creditors, add stress to the entire family, and can have a negative effect on credit history making it difficult to buy a home or get approved for any type of financing. Every person with a personal debt problem should seek a financial plan that will not only help to pay off debts but will keep him or her from repeating the same mistakes that caused the financial difficulties to begin with. Putting together a budget can help an individual see the amount of debt compared to income. Accounting for all expenditures is a good way to see where the money is going and where changes are needed to make the situation better. Bills that include high interest such as credit card accounts should be paid off as quickly as possible. Other options include consumer credit counseling, debt management, a consolidation loan, and negotiating with creditors. "And forgive us our debts, as we forgive our debtors" (Matthew 6:12).
The first step with successful money management is to make a budget. A budget should consist of total income and total expenses. All bills would be listed separately with the total amount due each month. Columns can be broken out by payday or monthly. Most people have certain bills they pay each payday so breaking the columns out by payday usually works best. After all expenses are deducted from total income then this is the amount that can be used to pay down debts and to deposit into a savings account. A budget will not help unless the individual and the family are dedicated to following it. Every person within the family unit has to be accountable for their spending. All expenditures have to be listed in the budget. Going over budget in one area means deducting the overage in another area to make up for the loss. A personal debt problem can be eliminated with the right plan and determination.
Credit card debt is a common issue today among consumers. Banks and lenders make advertisements for charge accounts seem very attractive. The temptation to charge is just too much for some people. Advertisements on television only make matters worse. Then the holidays roll around and all credit cards get maxed out. The best way to handle a personal debt problem when it is from overcharging on credit cards is to pay them off as soon as possible and limit using one or two at the most. Only keep ones with low interest and no annual fees or other types of fees. Transfer balances from high interest ones to low interest ones. Have the bank lower the credit limit and keep it low so the temptation to charge is kept to a minimum. Consumers can be responsible with spending but may find that they are irresponsible when it comes to using credit cards. With this type of personal debt problem a debtor should forego applying for any type of charge account.
Filing bankruptcy can help to eliminate unsecured debt but the effect on one's credit history will be bad for seven to ten years. A personal debt problem often leads consumers to consider filing bankruptcy. This may seem like the only option for those who have had income reduced due to illness or loss of employment. Before a consumer can file bankruptcy he or she must take a course in consumer credit counseling and obtain a certificate to present to the court. Having a bankruptcy on credit will mean a lower credit score and paying higher interest rates for new accounts. This will make it difficult to be approved for any type of loan including buying a house or a car. The lender usually wants the bankruptcy to be a couple of years old and there to be recent credit established that is considered desirable where the consumer has made payments on time before they will approve financing.
Mistakes that can be very costly include forgetting to write a check down in the checkbook, eating out everyday, charging over the credit limit on credit cards, and paying bills late that result in costly late charges. A personal debt problem could be traced to being careless. Making too many careless mistakes and before long there is not enough money to pay all the bills or buy groceries. Once a person gets in a cycle of trying to get caught up things usually get worse before they get better. When the bills that are behind carry weighty late fees and higher interest penalties then the consumer may feel that he or she will never get caught up.
A consumer credit counseling agency or a debt management company can be helpful when a person has lost hope with ever getting caught on paying bills. A counseling agency will be able to give some advice on options. A specialized plan can be worked up to help the debtor get priorities in order through budgeting and planning. Contacting creditors may prove to be very useful for negotiating payoff amounts, interest, and fees. If a consumer chooses to enlist the services of a debt management company they may be very helpful with negotiating with creditors. However, a person should find one that is legitimate and does not charge outrageous fees for their services. A personal debt problem can get better over time. The debtor needs to do some research, find out all options, and then make an informed decision.
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