How Can you Reduce or Eliminate Debt?
How to reduce Debt- Top Ten Tips
1. Debt Settlement.
This a way to reduce your debts and provide a single debt repayment. A debt settlement company will negotiate on your behalf to make a one off payment to your creditors. Often creditors are willing to accept 50% of the debt owed, rather than gain nothing from their debtor going bankrupt. Therefore debts of £20,000 can be reduced to a single debt of £10,000. This remaining debt is then paid off by making monthly repayments to the debt settlement company. The advantage of debt settlement is that in theory, your credit rating will not be harmed. This is because the creditors agree to accept the lump sum on the basis that they will not give you a bad credit rating. However, check with any debt settlement company about this. Also, look carefully at the interest and conditions set by debt settlement company's. See Debt Settlement advice
2. Debt Advice.
Do take advantage of free debt advice. Independent bodies like debt advice bureau can help give useful advice about managing debt. See
3. Take stock of your situation.
If you have high levels of debt don't panic and try to ignore the situation. Make a careful list of your existing loans and credit cards. If you know what you are earning and what you owe, at least it makes it easier to plan.
4. Debt Consolidation.
If possible you should consolidate your loans to the lowest interest paying loan. If possible take out new credit cards with a 0% introductory rate. If some credit card companies refuse you, don't give up. It is worth trying a variety of companies. Also, look around for companies which specialise in loans for bad credit. Avoid loan sharks who charge extortionate interest rates. Loans from relatives / friends can be problematic, however they may work for some. If you do take these loans make sure you have a clear plan to pay it back. See: Debt Consolidation
5. Reduce Spending
When our debts are high we often feel it is not worth saving a few pence and pounds. However, if we try in various ways to reduce spending, it can make a big difference at the end of our month. For example, switching gas and electric companies, cancelling magazine subscriptions, reading newspapers online e.t.c. These are all ways to reduce spending. Make a list to see how many ways you can find to reduce spending. The extra savings can be used to pay off the debts with the highest interest. This gives a double benefit.
6. Look for extra income.
Start a website on debt management. Get enough traffic and you will be able to earn from google adsense :)
7. Don't Despair
It is important to try and maintain a positive attitude to finance. No matter how bad your situation is, it is possible to improve it through a variety of strategies.
8. Negotiate payment holiday's with Companies
Banks and major companies may be willing to help more than you expect. If you speak to your bank manager he may be able to help. Don't assume all big companies are not interested. Generally companies do wish to help people avoid bankruptcy. If you really can't make a payment it is essential you explain to the company first, this will make a big difference to your credit rating.
9. Maintain Credit Rating as best you can.
No matter how much debt you have, it is important to protect your credit rating as best you can. High debts don't give you a bad credit rating. Bad credit ratings come from failing to make any payment without explanation. For example, if you missed a payment for any reason, don't leave it at that. Write to the company, apologise, say it got lost in the post. Ask them not to give you a credit rating - you will be surprised how often it works.
10. Make a Plan.
Make a clear plan to avoid bankrupty. List all the ways you can reduce spending. List all the ways you can increase incomes. Research various options for consolidating debt and list the best ways of managing your existing debt. If appropriate take the advice of an independent arbiter. It is important to make a clear and permanent change. Look to overcome the fundamental cause of debt.
By: R.Pettinger 21/05/07