Distress that is caused by insurmountable debts
Debt is an amount of money that has not been paid by the borrower to the creditor. Whenever a loan or credit is taken from any source, then that money has to be returned to the creditor within the due date. Obviously, most credit agencies offer time for repayment and loans also have an installment procedure for repayment. Hence, if a person is diligent and resourceful, then he/she will be able to make the repayments on time. But in some cases, due to some untoward and unforeseen events, the repayment is not made on time. This is called a default. Usually, one default does not irk the creditor but if the defaults become a regular affair then problems crop up, and debts get concentrated.
Distress that is caused by insurmountable debts
In a financial turmoil, everything can go haywire, and it might become a depressing state of affairs for the person who is surrounded by many default payments. The financial problem affects every other sphere of life. Even relations get affected due to monetary issues. Once the debts start bulging, then the clarity in perspective and focus on the professional front is jeopardized. Debts can also trigger a depressing mental condition. In order to acquire genuine assistance, one should always look for a service provider who has been working in the business of debt relief programs for a long time.
Preparing a document enlisting debt
Before diving straight into the self-handling techniques available for debt control and repayment, a debtor should first prepare a record that should include the following things:
- Dividing the credit taken into two primary categories unsecured and secured.
- According to the two main categories the file should be prepared separately, i.e., one for secured loans and the other for the unsecured ones.
- In the secured category if loans have been taken then the property that has been pledged should be noted down. The payment deadline for all the secured loans should also be noted.
- In the unsecured section, all the credit sources should be noted including multiple credit cards.
- The interest rate levied on each card should be written against the total outstanding amount from that credit card. Similar notations should be made for other loan sources by listing the interest, the amount to be paid and the time available for paying those.
- When the files have been prepared than in the unsecured loans a list should be prepared by keeping the highest amount of debt on the top and lowest amount at the bottom.
- For the secured borrowing priority can be based on payment deadline and the asset. For example, if a loan has one's house as a guarantee, then it is vital to resolve and close that loan account otherwise the house will be confiscated by the lending agency.
- Care should be taken that no loan or debt is left out from that list.
- Next, the capital resources available and the amount that is earned periodically (if there is a fixed income source) is calculated.
The record will help the person to maintain his/her focus on salvaging the situation. However, one can also seek the services of professional for conducting the above mentioned tasks and to gain more information.
Techniques available for handling a debt situation individually
After completing the documentation of loan and calculation of income, one should move on to the techniques available for reducing and eventually resolving existing debts. Some of these methods are discussed below:
- The debt with the highest interest rate can be the main concern when it comes to payment. Usually, the credit cards have varying interest rates and the one with the highest rate will also cause the biggest debt. Hence, utilizing all the resources for removing that particular high-interest debt will reduce the strain considerably. It might take time but once the biggest debt source is removed from the rest of the debts will become easier to handle.
- Reassigning balance to low interest or no interest credit card might make it a bit easier. Though this will not lower the present debt, it will not allow it to increase. However, this step can be taken only if capital can be procured to pay that debt within a certain period. Usually, the credit cards that offer zero interest as an initial bonus levies very high rate of interest after the promotional period. Hence one should be sure that the owed money can be definitely paid within that time frame.
- When the funds present is quite low in a situation where there are piling debts then choosing to make the smallest debt amount as the priority is a good technique. The debts can be arranged in increasing order and repayment can be started from the smallest amount. This will help a person to solve one debt at a time and even if the debt is not very huge but striking it off the debt list is always a relief.
- If the monetary problems are beyond control and complete repayment of all debts is impossible then contacting the creditors for settlement can be a suitable path. A debtor can seek settlement for debt by paying a certain amount as a onetime payment for closing the debit account.
- Settling with creditors is not easy because most lenders do not want to take less than what they should get. But if the debtor can satisfactorily show proof of his/her debilitating financial condition, then the creditor might agree to settle, but in such cases, an immediate cash payment of the settlement money is needed. Hence the borrower has to be prepared to make instant payment if the agreement is accepted.
Wrapping things up
Choosing to work out debt solutions on one's own undoubtedly provides a person with the opportunity to maintain control over his/her finances but if personal supervision and management are not possible then services are also available that will work with the borrower for making debt settlements.