Sorting Out Debts To Gain Control Of Personal Finance
Debt is an unavoidable part of most people's lives and even essential part of business operations
. If used well, debt would allow people to accumulate wealth through property ownership and allow companies to grow by investing to projects that return more than the cost of debt. Unfortunately, life does not go according to plan sometimes.
However there is a different side to the debt problems many people facing. This is mostly to do with personal spending. In good times, people accumulate debt like there is no tomorrow. According to reports "Americans owe more than $2 trillion in creditor debt, not including home mortgage loans." This averages out to approximately $20,000 per citizen. At good times consumers were encouraged to rely on credit, because spending is the engine of economic growth.
So people facing debt crises are not alone. Some will learn their lesson fast and get control over their personal finance, some will go as far as bankruptcy. For those who want to take control and start the long road to recovery, there are a few ways;
The first step requires thorough review of income and expenses. When expenses are more than earned income it is time to engage in budgeting and stop wasteful spending. Budgeting is a personal solution to the problem and the most effective. Providing the person sees the problems and can take control over them, they do not to go trough personal finance reviews with a third party or disclose any statements. This requires discipline and self control. If they go through their expenses carefully, most people would find out how they have been wasteful and put a stop to most of them. Then, they can channel the money to paying their debts. If help needed in controlling the debt train, non-profit credit counselling centers are available in most cities.
Homeowners with equity in their home, refinance home mortgage loan could provide debt consolidation. They could exchange all their high interest credit cards and personal loans with one low interest home mortgage refinance. That means, their non secure loans become secured on their home. So they need to take this into account. Defaulting on loans can result in foreclosure.
Another option for people who are overwhelmed with debt is Debt settlement. This is a process of negotiating a cash settlement with the creditors in exchange of them writing off part of the debt. Debt settlement should be used as a last resort because it can cause serious harm to credit scores.
Little by little, people can chip away those mountains of debts. You need to have a plan and stick with it. Be patient, it has probably taken years to accumulate the debt and it may take a while to get rid of them.
by: jslee
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