Living with debt : page 2
Put your debts in order of priority
You'll need to repay all your debt eventually, but some repayments are more important than others. Your rent or your mortgage is first in the queue to be paid, so make sure this becomes your number one priority.
Next, any essentials such as car finance (if driving is essential for your job, for example) and heating and light.
Once your absolute necessities have been taken care of, you'll need to put your other repayments in order.
The most obvious way is to pay off your most expensive debts first, but this may not always be the best plan. If making a repayment on a large, expensive debt means that you get hit with late payment charges on smaller, cheaper debts, then it would probably make sense to get these smaller debts cleared as fast as possible, which will simplify your situation and mean less chance of incurring charges.
Speak to your creditors
It's always worth speaking to your creditors to see if they can offer any help. For example, you could ask for more flexible repayments, or for interest charges to be frozen, which may make things easier in the immediate future.
Contacting your creditors and talking about your debt problems will obviously seem very daunting, but it's unlikely to be as unpleasant as you'd think. The person on the other end of the phone is human too, and they'll be highly trained and experienced in dealing with people with debt problems, and will treat you with respect and sympathy. And if they don't, ask to speak to their superior, until you get someone you can deal with!
If you owe a company money, they'd rather explore all the possible ways of helping you pay them back rather than losing the money completely or having to go through expensive recovery processes, so it's always worth asking them for advice.
If you really can't stand the thought of dealing with your creditors in person, a debt management program will achieve the same results - or even better, as an experienced professional will be negotiating on your behalf. This is not a free service though, and you'll be paying fees that might better be put towards clearing your debt. The choice is yours.
Debt consolidation
Debt consolidation is a popular way of 'wiping out' debt, although this is largely an illusion. By borrowing money to pay off your debts, you're simply replacing many smaller debts with one large one. And as the repayment period is likely to be much longer than your current ones, you'll almost certainly end up paying more interest overall.
Having said that, by spreading your repayments over a longer period, your monthly repayments will be lower and more affordable, and so can be an effective way of re-ordering your finances and getting things back under control. Just be sure that you're not just piling even more debt on your shoulders that will come back to haunt you a few months down the line.
Planning for the future
It might seem a long way away now, but someday you will come out of your current debt situation, and get back on a more even financial keel.
After all that hard work and worry, it's essential that you don't let your guard down, and that you continue to keep a close eye on your finances. This means only using credit when you have to, keeping up with your repayments, living within your budget, and generally making sure that you don't let things get out of control again.
Good luck!
© 2008 Debt Sorter
