In today’s modern world, being completely debt free is almost an impossibility, well certainly for the normal man in the street. We need to enter into debt for a range of reasons, most notably if we want to own a vehicle or even a house. Although debt has a very negative connotation, much of it can in fact be considered to be good debt. Take a house for example. Taking out a mortgage to buy your own home is certainly a good form of debt and once paid off over 20 years, the home is yours.
Unfortunately, there are many other forms of debt products that we use on a daily basis. These can lead to serious debt problems, especially when not used correctly. But how do you know if debt is a problem in your life?
The warning signs of debt
Debt is not something that can just hamper you overnight. It takes time for it to become something that can really affect your life. Luckily, if you keep a look out for the warning signs, you can take note of the fact that your debt might just cause trouble in your future. But what exactly should you be looking out for? How do you know that debt might become a problem in your future?
Firstly, do you borrow money to pay off other accounts or even friends you might have lent from before?
Secondly, are you using your credit card to pay for bills or worst still, your groceries?
Thirdly, do you have an overdraft facility that you are exceeding on a regular basis?
Lastly, do you some time not make instalment payments on various accounts or other loan products? Does this lead to penalty fees?
If you have answered yes to any of the above questions, you might be starting to fall into the never ending cycle of the debt trap. Act now without delay before you fall deeper in!
Making positive changes
The first place to start is to see where you are wasting your money. This is done by compiling a simple budget with a thorough tracking of every cent you spend and on what you spend it on. By doing this simple task, you will be amazed at how much money you actually waste. Even the cheapest item adds up over time, especially if you keep on buying them. We all fall into the trap where we think that something is so cheap that it doesn’t really affect our money situation. But buy it five times a week (your favourite chocolate for example) and you will soon see the dent it puts into your bank account.
Rest assured, changing your life around when it comes to debt is certainly not going to happen overnight. It is a long fight and one where you must persevere. If you are unsure where to start, it might be prudent to make use of debt councillors. Often people do not approach others to help them as they are too embarrassed about their debt problem. Suck it up and get help! These people are experts, they will tell you exactly what you need to do. Your debt problems might lead them to make one of the following suggestions.
- Declare bankruptcy
If you are at the point of no return, this might be your only option. But your debt counsellor will only advise this if there is simply no other way around your debt problem. Bear in mind, by declaring bankruptcy, you will lose your house as well as your vehicle in most cases. All other debt will fall away, however.
- Debt relief orders
Debt relief orders can be written up for people with less than £15,000 as well has no assets to their name. In this situation, you do not file for bankruptcy but your debt is written off.
- Voluntary arrangement for individuals
In this situation, an insolvency expert will help strike deals with all your creditors which allow a longer period to pay off debts. Instalments are lowered as well if this path is chosen.
If your debt is not too much but open with various financial institutions, you might consider a debt consolidation loan. If this is your choice, make sure you pay off your various loans which just leaves one loan to pay off in the end. This makes it far easier to keep track of your debt, especially when away from the office.
No matter which way you tackle your debt, it simply needs to be done. Make sure you use an expert to help you as well. You simply cannot do it by yourself.