Becoming Debt Free
It's not just banks and government who we can blame - almost all of us are guilty of abusing credit
. Whether it's student overdrafts, credit card shopping sprees, expensive mortgages or even store cards we have become used to spending beyond our means on a daily basis. While debt is a relatively safe way of smoothing out financial undulation, it's easy to let it get out of hand.
Once the access to credit is available, it could just take an illness, redundancy or some other catalyst to trigger the tentative balance to be broken. When debts begin to spiral, it's important to heed the warning signs and act as quickly as possible. Ignoring payment requests can only lead to communications from debt collection agencies, and the longer you ignore the tide the worse your situation will become.
Some people manage debts more efficiently than others, but the right solution is always unique to each person and their situation. One popular method of easing debt is to switch them to new credit cards, which often offer 0% on balance transfers as an introductory offer, and maybe even a lower interest rate. This is a good way of managing small debts, as long as you are vigilant in checking the small print and ensuring that the bank isn't hitting you with extra hidden charges, but it is only a temporary fix for someone with a high level of debt.
When substantial debts are present, many look for other sources of finance such as re-mortgaging their home or gaining more credit using a property as collateral. Using assets in this way might be tempting, but missing as little as one payment can have very serious consequences, and you should never lose sight of the fact that it might be your home at risk if circumstances beyond your control prohibit you from making these payments.
An Individual Voluntary Arrangement, or IVA, is often seen as an alternative for filing for bankruptcy, and is a five year agreement entered into by an individual and their creditors, agreeing reasonable manageable payments against debts based on income, capital and reasonable outgoings such as housing and sustenance. The number of IVAs being agreed each year is growing rapidly, as more people take active steps to manage previously out-of-control debts. If financial situations improve, lump sums can be paid to reduce the five year agreement.
Wiping your debt is an empowering achievement, and a debt-free life is achievable as long s you are realistic about your situation and only ever agree to make payments which you can afford.
by: john mce
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