Debt Equals Stress: Ways To Cope

Many people think that debt is caused by people that just can’t control their spending. This does happen but there are many other reasons why people suddenly find themselves in debt.

People in debt often think that they can’t cope because there is no hope of getting out of their situation. If you find yourself in this situation then there are actually a lot of thing you can do. The main thing is not to panic and take time to work it out making positive steps to helping yourself get out of debt.

The first thing to do is to be honest with your situation and find out exactly how much your debt you are in. You need to sit down and work out how much money you owe and how much you have to pay on a monthly basis. This includes all the things you buy. By looking at a bank statement for a typical month you will see the things you spend your money on. You then need to work out how much money you earn on a monthly basis. This will tell you if you are spending more than you earn. If you are breaking even or earning more then maybe you need to think about cutting back and putting some money aside to pay you debt off sooner. If you are earning less, and many people are, then you need to look at the things you pay for month by month and see where you can cut back. You may have to be a bit creative in finding ways of spending less every month.

Debt for some people can arrive suddenly if you have recently separated from you partner, or if you lose your job. If this is the case then the credit companies advise people to tell their lenders by sending a letter explaining their situation. This quite often helps because mortgage companies have great difficulty in taking money from people that simply don’t have much. It is usually far better for them to work with you on helping you repay your debt so that they get their money, even if it takes them a bit longer. The three credit companies Experian, Equifax, and TransUnion give good advice about coping with debt.

So if you find yourself in debt, don’t panic. Be honest with yourself about your situation and be constructive by thinking of the positive things you can do to help yourself get back on the right track.

Get Over Your Debt!

Steps to Eliminating Debt

Debt is easy to get into. We all buy things on credit, take loans out to get instant money or pay for goods on credit cards. Credit can take minutes to build up, but years to pay off. When debt builds up we end up paying regular monthly payments that simply increase every time we get more credit.

The first thing we all have to do to clear debt is stop getting into any more debt. If you never took out another loan and cut up your credit cards then after a while you will pay off all your debt (provided you are making regular monthly payments).

However, there are lots of clever ways to pay off debt quicker and help you to become debt free. Simply make a list of all the debt you have. This is everything that you pay to a creditor and includes any loans, credit cards, financed items such as the finance on your car or furniture and also the big one, your mortgage.

You should know:

1. How much the debt is for or the total amount

2. How much is left to pay off the debt

3. What you pay every month

4. How many months you have left to pay

5. AND the interest rate you are being charged

If you add the amount of debt (number 2 above) you have left on each one of your debts then this is how much you owe to creditors. If you then add up all the monthly payments (number 4 above) then this is what you have to pay every month. Once you have worked this out then you are in a good position to start working out the fastest and cheapest way to clear this debt.

Paying off the debt as quickly as possible:

There are several ways you can pay off debt quickly. Some will be better than others and it also depends on the type of debt you have.

The interest pay off – Targeting number 5 on the list above

If you have a credit card or mortgage then you should be charged interest monthly on the amount of credit you have left to pay. If you pay off larger amounts off this then amount you have to pay every month goes down. The more you pay off the less you have to pay in interest every month. If you take the credit card or loan that charges you the highest rate of interest, then paying this off earlier saves you the most amount of money every month. Once it is paid off, you move to the next credit with the biggest interest rate. Because mortgages usually have the lowest interest rate out of all your loans or credit cards and is secured debt you should leave this until last on your list.

For some loans, creditors can sometimes charge the entire interest on the full amount across the time you have to pay the loan so that if you decide to pay a loan off early, you may still end up paying the same amount as if you continue to pay the loan every month. In this case you are probably better off not paying that specific loan early and focusing your efforts on a different loan.

The minimum loan pay off – Targeting number 2 on the list above

If you take a look at all your loans and start paying extra on the smallest loan then this will be paid off the fastest. Once you pay this off, take the amount you were paying on that loan and use it towards paying off the next smallest loan. Eventually you will again end up with only your mortgage left which if you use all the money you used for your other loans this will also be paid off much faster.

The biggest payment pay off – Targeting number 3 (or 4) on the list above

This works best for small loans with fixed payments and is great for people who find themselves with lots of loans with money to pay off on all of them. Because you want to reduce the amount of time and money you have to use to pay off the loan you simply target the largest payment you have to make every month. This may be the loan with the highest interest or the one the one with the highest balance. Once you put everything you can into paying this off your monthly payments will suddenly drop.

You can also do this by targeting the loan that has the least number of months left to pay off the debt. This will reduce the monthly payments quicker.

This will leave you with a lot more money every month and helps to control your finances better especially for people that struggle to pay off their loans. Clearing the loan that takes the highest payment every month has the biggest effect on your bank balance every month. Clearing the loan that has the least number of monthly payments left has the fastest effect on your monthly bank balance.

The clever part is to then use the money you save once you have paid off the loan to pay the other loans off faster and not to get comfortable with the debt you have left.

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