Dealing with life’s run of the mill challenges can be enough to manage, nevermind the consuming stress that can come with growing debt. And for millions of individuals, it’s a constant battle. But the good news is that with some smart strategies and commitment, you can overcome your mounting debt and get back on track toward financial stability.
The Risks of Ignoring Growing Debt
Many choose to simply ignore their growing debt, hoping it will go away on its own. And although we understand the mindset behind this type of inactivity, unfortunately this approach often leads to more serious consequences down the road.
Ignoring mounting debt can ultimately lead to outright financial distress. Additionally, challenges that may arise by ignoring mounting debt can be scenarios such as: high-interest rates and late fees piling up, damaging your credit score and making it harder to get approved for loans or credit cards in the future. It can also lead to collection agencies harassing you and potential legal action being taken against you.
So instead of ignoring your financial problems, take control and start implementing these four tips to overcome your mounting debt:
How Can I Pay Off My Debt?
It’s easy to think that the solution to getting out of debt is simply paying it off. However, the debt based financial system allows, and even promotes, consumers to borrow so much debt that, barring a windfall, they will never have the ability to pay it off in their lifetime. As such, for many people struggling with debt, simply paying it off may not be a realistic or sustainable option.
As we’ve seen, ignoring the problem can make it worse. However, trying to pay off debt quickly without proper planning or budgeting can lead to financial strain in other areas of life, and ultimately failure in the plan.
So, what is the best approach? Here are a some tips, and cautions, to help you get started down the road to being debt-free:
1. Get Honest With Yourself
The first step is often the hardest, and with debt, that means being honest with yourself about your financial situation. Take stock of all your debts, including credit cards, loans, and any other outstanding balances.
Make a list of the total amount owed on each one, as well as the interest rates and minimum monthly payments. This will give you a clear picture of what you’re dealing with.
You may find that you can shave off some expenses and put that money toward paying down your debt. Or, you may realize that your current income simply isn’t enough to cover all of your debts and living expenses. Being honest with yourself will help guide your next steps in creating a plan to tackle your debt.
2. Talk to Your Lenders
Now, before taking this step, proceed with caution, we cannot stress the caution enough. The option of talking to lenders, is not a recommendation to contact your creditors and bare all to them. In fact, doing so could compromise your position with them and they could take steps such as cut off credit supply, label you as a risk, or maybe even call the loan. You know your financial situation along with your own capability to speak with lenders, without giving away too much and putting yourself in a bind. After that very cautionary note here is a known way that some people find helps them get a handle on their debt. Contact your lenders directly to find out if you have options such as:
- Lower interest rates to reduce monthly charges
- Extended payment plans to make payments more affordable
- Partial settlement agreements to resolve collection balances, at a discount
Engaging lenders shows good faith effort to address debts rather than avoidance. It also helps facilitate customized assistance. You never know what options may be available to you unless you ask.
But again, be very careful and tread lightly. We put this option in the article because it is a real option, and it does work for some. Not everybody’s financial situation, type of lenders, nor abilities are the same. In the same respect, we bring attention to this option because it seems to be one that is floating around out there, but seldom is there a word of caution attached to it. This may or may not be an option for you, and is something you need to determine for yourself.
3. Explore Debt Management Plans
Another way to help gain control of your debt is through a Debt Management Plan (DMP). A DMP is an agreement between you and your creditors where you make one monthly payment to a credit counseling agency, which then distributes the funds to your creditors on your behalf. This can help simplify your payments and potentially lower interest rates.
As with the prior option, a few words of caution when considering a DMP. First, it is important to know that credit counselors tend to receive their funding from the creditor side of the industry. So, you have to ask yourself if you believe that to be a conflict. If someone else is paying them, then who are they really working for? That is a good question to always ask when somebody tells you that their service will cost you nothing. Secondly, we tend to only recommend exploring the credit counseling, or debt management plans, on lower debt amounts. And by lower, we often mean $4000 or lower. As the debt level rises, a plan like this can often become quite expensive, and will tend to not improve your monthly cash flow. Any solid debt relief plan should always be looking to improve your monthly cash flow, because ultimately that is where you are going to feel, and see, the relief. Lastly, creditors are not obligated to partake in a credit counseling program, and you are not lawfully protected from your creditors. Because of that, attempting such a program could make life more expensive and stressful. So, like option #2 in this article, why do we mention it? Simple. When looking for debt relief, it is imperative to look at all options. By doing this, you will sleep better at night knowing that you have reviewed all options, and have absolutely picked the one that is best for your situation. Furthermore, as mentioned, a credit counseling plan could work for some who have lower debt levels. Doing your due diligence in asking the right questions can help ensure whether or not a DMP is the right option for you.
4. Consult a Specialized Relief Company
For professional guidance on advanced debt intervention options, contact specialized financial experts like us at GetMeDebtFree. Depending on your specific situation, we look at what a customized solution for you would look like, including:
- Consumer Proposal which becomes a lawful agreement between you and your creditors. This option will stop the interest, likely reduce the debt load, and should improve monthly cash flow.
- Interest rate reductions through refinancing options.
- Accelerated Debt Payments – this method can work very well if you currently have the available cash flow to pay more than the minimum payment on your debt, every month.
- Bankruptcy evaluation (if appropriate) and tailored to your advantage as much as possible. Bankruptcy can be very expensive and can take a long time to complete. Therefore, having someone on your side working for your best interest, is probably a good idea, at least that’s what we believe.
Our experience across thousands of client cases combined with independence from lender influence can enable highly favorable outcomes. And rather than seeking to replace your struggling finances with a new set of burdens, our goal is to help you achieve true freedom. The end result? A life without debt – and the contentment that comes with it.
You Don’t Have To Drown In Debt
A life underwater, where one is constantly struggling to stay afloat and feeling overwhelmed by the weight of debt, is not the life anyone dreams of. Yet for many people, it becomes their reality. The constant stress, anxiety, and fear that come with living in debt can take a toll on your mental and physical health as well as your relationships.
But there is hope. With our team at GetMeDebtFree, you can break free from the chains of debt and reclaim control over your finances. Our experience and knowledge in debt elimination strategies have helped a multitude of individuals and families achieve financial freedom, and we are ready to do the same for you.
Ready to start your journey towards a debt-free life? Members of our expert team will work with you to create a personalized plan that fits your unique situation and goals. We understand that everyone’s financial circumstances are different, and we believe in finding the best solution for YOU.