Debt Reduction (cont.)
<< back to Reducing Debt pt.2
Tackling the debt
The first thing to do when tackling your debt problem is to talk to
the people to whom you owe money. Chances are you are being hit with
penalty charges and perhaps high interest. Be honest and polite with
your creditors, and approach them with a plan to pay back the money.
It is always in their interest to help you pay them back, so they might
be willing to put a freeze on the penalty charges as long as you continue
to service the outstanding amount. Although having to make such an approach
can be quite humbling and embarrassing, you could potentially save yourself
a lot of money by doing so. You certainly have nothing to lose.
The next step is to identify the loans that are attracting the highest
interest or penalty charges and target those to pay off first and then
concentrating on the next highest and so on. Remember in your budget
plan that while paying off as much as you can on one debt, you’ll
also have to service any other debts that you have. If consolidating
your debts to a lower interest scheme is an option, then it’s
something that you should consider, but remember to factor in termination
fees, set up charges, and any other hidden charges that might make consolidation
not worth it.
As you pay off each one of your debts, add that repayment money to
the money you’re already paying to service the next debt etc.
Over time, these payment amount should snowball so that your debts should
become easier and easier to pay off. Don’t forget to reward yourself
after you clear each debt before moving on to concentrate on the next.
A large portion of the battle to getting rid of your debt is your mental
approach. Sure, you need the money to be coming in, and you need to
use as much of that as you can to pay off the debt, but it’s all
too easy to succumb to peer pressure, advertising, impulse shopping
etc and suddenly find yourself adding to your woes instead of alleviating
them. If you can get into the habit of analysing each and every purchase
before making it, if you can get into the habit of saving money where
and when you can, and if you can rise above the marketing, the peer
pressure, and the impulse buys, you’ll be on a very fast track
to paying off your debt.
Further links:
Money saving ideas
Credit Cards – how they work, how
to use them, how to pay them off.
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