After the financial crisis of 2008, the average level of household debt rose to new records. This was true of debt in many different forms, as outstanding credit card balances, student loans, and problematic mortgage were all seen at their highest levels in recent memory. Because of this, it has become clear that consumers need to make strict rules to overcome the rising level of debt that is seen across the country and around the world. Here, we will look at three ways consumers can tackle their debt problems and create a long-term plan to overcome debt before it gets out of control.
Acknowledge the Amount You Owe
One of the first problems consumers face is the failure to truly acknowledge the amount of amount of debt that is owed. This is especially easy for consumers that have their debts spread out over a number of different sources. To be sure, it is not an easy task to go through all of your bills and accurately add the balances. But what seems to be most difficult is coming up with the mental and emotional fortitude to face the problem and accurately acknowledge the amount of debt you owe. As they say, “the first step toward a solution is admitting you have a problem.”
This is as true in the personal finance realm as it is anywhere else, so do not forget to complete this step before you do anything else. Taking an accurate assessment of your real debt levels will also enable you to efficiently budget, and determine where your financial resources should be allocated. This is critical in paying off your total debt.
Reduce Your Interest Rates
If you are having difficulty repaying your debt balances, it is a good idea to call your lending companies and request a lower interest rate. You might be surprised how often these companies are actually willing to work with you in easing your debt burden. After all, if you are completely unable to make payments, it is much more likely that you will be forced to declare bankruptcy — and this would mean that the lender will not be getting its money back. For these reasons, it is always a good idea to try negotiating with your lender to get repayment terms that are more favorable.
Last, remember that repaying your debts is going to be a marathon — not a sprint. It is important to pace yourself and exercise patience. After all, debt repayment schedules are usually designed to be manageable over an extended period of time. If you need to make smaller minimum payments, you will need to extend your repayment period until the individual payments are more appropriate for your financial situation. Mostly, it is critical to focus on the present and make sure that your finances are in order so that you can make your payments as they become due. Missing payments can become very costly in a short amount of time, so consumers that pace themselves will be much better situated in accomplishing their repayment goals.