Everybody wants to get out of debt. If your personal finances have become bad that you fell entangled into several loans that you must repay, it is time to review your financial condition. How much do you earn and how much do you spend monthly? To jump start your goal to get out of debt, begin tracking your every expense along with your monthly income.
Income and expenses vary. As you make a list, be sure you include all your regular monthly paychecks, grants, and government assistance obtained. Track down your mortgage, loans, and insurance payments. Enumerate all the inflows and outflows of money on a monthly basis. After that, you could proceed to your practical calculation of income and expenditures. Do not miss your variable and discretionary spending, which include costs for clothing, gifts, and entertainment.
Get the sum of all your income for a month and of all your expenses. Deduct the total of expenses from the total of your income. The difference would be the logical amount left in a month. It would be ideal if you are left with a positive balance. Apply the surplus to pay off your debts on a monthly basis.
A negative balance is not ideal, of course. That means you are currently living way beyond your means. If that is the case, it is time you seriously reassess your monthly spending. There is a need to eliminate unnecessary monthly expenses. Make it your goal to have an amount left over in your pocket at the end of every month.
From there, start to look for and adopt strategies that would jump start your endeavor to get rid of debt. One common option is to apply for and obtain a debt consolidation loan. By doing so, you could transfer several or all your debts or loans to another credit facility. If possible, you may also use a credit card balance transfer feature for the transaction.
Your main goal should be to repackage or consolidate your debts or loans into a single loan with a much lower interest rate. With lower interest payments required, you could definitely save on costs. Use such savings to add some amount to your monthly repayment. This way, you could end your loan faster.
It also helps that you have just a single loan to repay each month. Aside from being convenient and more manageable, debt consolidation could also help you prevent a possible default, which leads to growth in debt because of penalties and late payment charges.
Bankruptcy and debt agreement
If you incur negative finances at the end of each month, you may opt to file a bankruptcy or seek a debt agreement with your lenders or creditors. Bankruptcy may free you from shouldering debt obligations. But it could only be advantageous in the short term.
Debt agreement would enable you to stop incurring interest payments on your debts. You could get into a more comfortable or amicable repayment scheme or schedule with your creditors. Both options could drastically affect your credit rating, which would surely bring more troubles in the future especially if you would need to apply for loans or open new credit card accounts in the coming years.