What to Do If You Hit the Debt Mire

When debt goes bad, it becomes more than just a financial problem. It can take over your life. If you have a debt problem the earlier it is handled and dealt with, the less likely it'll turn into a crisis, and the more money you'll save in the fullness of time.

The very nature of borrowing means that interest increases over time and if it isn't dealt with promptly, it can spiral out of control and land you into trouble. Particularly with credit cards, when interest payments are large, and a minimum payment offers a seemingly manageable solution; what is actually happening is this: the balance is being eroded like the sea bites away at the shore. It'll disappear into the ocean eventually, but might take many years to do so. What you need is a more radical approach, where chunks of debt are eaten away each month.

Being in debt can be a stressful time. Many people are scared to tell husbands, wives, friends – anyone. There's a kind of stigma attached to the problem, but there is always a way out.

Traditional debt advice proscribes borrowing your way out of a problem. Yet this ignores the reality of most debts. A more advisable and realistic approach would be to never borrow more to get out of debt trouble. If it is possible to borrow more cheaply elsewhere to replace existing borrowing and consolidate your debt, then this is an eminently sensible approach.

The first step should always be to work out your monthly outgoings and try and trim down your spending on luxuries and things you can do without. This doesn't mean you have to live the life of a monk and forgo all worldly pleasures! But by adopting sensible spending patterns you can redirect some of your monthly income into paying off your outstanding balances. Always keep at the front of your mind the fact that the longer the debt smolders away, the more you spend in interest payments.

Those with big debts may save thousands a year in interest by reconsidering their borrowing commitments. Do this in three ways:

i) Lower the interest if possible by moving your debts to reduce the interest cost.

ii) Pay the worst first: prioritize paying off the highest interest rate debts first

iii) Utilize any free debt advice there is. A non-commercial agency will give you good advice, focus you on your priorities, and place any problems in context. Things may not be as bad as they first seem.

Of course, there's other basic, practicable things you can do on your own. It's incredibly important to get on top of credit card debts as soon as possible. Don't default or miss payments. Let the credit card company know if you are going to be unable to pay – it's always better to talk to them than putting your head in the sand.

If things aren't that bad, there's a variety of easy strategies you can implement that will help ease things for you. Consider a credit card balance transfer to a lender offering a lower rate of APR. This will mean you spend less on interest payments each month and start to attack the overall balance with real venom.

You could take out an unsecured loan as a way of consolidating your debt. Personal loans can give you a consistent cheap debt, and as you must make the repayments each month, it helps provide structure to your repayments. Those with poorer credit scores might not always get decent rates, but it's still often a cheaper option than paying back credit card debt each month, and overall a faster method of repayment.

If you have them, use savings: The interest paid on savings is usually far less than interest charged on borrowing, so paying off debts with savings makes eminent sense. Even if you think of your savings as an ‘emergency cash fund' or money for the future, better to fall back on it in the short term and pay it back later, than paying interest to a credit card company so that money for some far flung eventuality is at your disposal.

It's worth mentioning that for many people, credit cards provide sensible short term, flexible lending, that's both cheap and convenient. You should always try and proceed cautiously, but credit card debt woes are not an inevitable consequence of taking them out. Tens of millions of Americans use credit cards cheaply and conveniently every year.

For those who feel they are in trouble, don't feel stigmatized by your debt woes and don't pretend they're not there. Help is at hand should you seek it, and a solution is never far away.

About the author:
Max Hunter is the author of many credit related articles. If you are looking for help with Home Loans or any other type of credit issue please visit us at http://www.creditcardunlimited.com