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When it comes to debts, consumers have a tendency to ignore the problem until it becomes unmanageable. However, by facing up to the issues and tackling it head on, any consumer can gradually begin to work their way out of debt.
In the wake of recent economic hardships, it should come as no surprise that many people are finding themselves in more debt than they can comfortably manage. Statistics show that while a consumer may appear to have a solid credit history and to be paying bills on time, often they are turning to credit to make ends meet and end up resorting to bankruptcy when things become to much to handle. However, financial experts believe that consumers do not have to resort to bankruptcy and offer some advice which can help consumers to get out of unmanageable debt.
Admitting The Problem And Asking For Help
The first step to getting out of unmanageable debt is to admit there is a problem. Unfortunately the majority of people avoid asking for help until it is almost too late. While you may want to work through your problems on your own, it is important to remember that asking for advice or support is nothing to be ashamed of. If you refuse to face the reality of your ever increasing debts then they will soon spiral out of control and leave bankruptcy as the only option.
Admitting that there is a serious problem and reaching out to experts can get you the much needed help to solve the problem. Part of admitting the problem is conducting an inventory of your life and finances. Start by writing out a list of everything you owe and every outgoing expense you have to cover. Often seeing your total debt written down in black and white can be a shock, but that shock can often give you the push to take some much needed action.
Maximizing How Much Can You Pay To Debts
Once you have your debts and expenses listed it is time to think about how much money you have to work with. Count up all of your income as a starting point. Then spend some time thinking about what you really have available to you. Often it is more than you think. If you often eat out or purchase your morning coffee from a cafe cutting out these expenses can have a huge impact on your ability to pay off your debts. Look at your expenses and cut down or cut out anything unnecessary.
Perhaps you could walk to work or pack a lunch or perhaps you could switch utility suppliers or buy cheaper brands. The more money you can make available to pay towards debts, the faster you will be able to reduce that debt. It is a smart option to pay the most to your largest debt as it will often have the highest rate of interest as well. Minimum payments to high interest accounts get you nowhere as the minimum payments often does not even cover the monthly interest so the total debt never reduces.
How Much Credit Do You Need
Once you manage to pay off an account, ask yourself if it is worth keeping. Sometimes the problem stems from having too much credit available. If you have two or three credit cards, it is a wise move to keep only one of them active. However, you might not want to close the account completely as the length of time a credit account is held affects your credit score positively, but you can pay off the balance then destroy the card so that you cannot use it.
If you do wish to close the accounts to remove temptation completely then close newer accounts rather than long standing ones and spread any cancellations out over several months rather than closing 3 or 4 accounts in the same week. Once you have reduced your debt, it is also useful to start trying to save a little of the money you have been paying to debts in a high interest savings account. This will provide a financial cushion as you climb out of debt.
In conclusion, in order to get out of debt and avoid bankruptcy it is important to pull your head out of the sand and face the problem head on. With careful research and planning you have the ability to reduce your debts and free yourself from financial burdens.
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