The problem with talking about things like debt settlement and debt management is that it is all easier said than done. The fact remains that you can always have a person on a pedestal telling you what to do and what not to do. But it is NOT easy. And it requires a whole lot of sacrifice and prudent thought to absolve you of your sins. So the first, most important thing which I would like to stress on here is that debt consolidation is an agonizing experience for an individual and one wouldn't want to go through it again. So debt is best kept at a manageable level. Manage your finances better today, for a financially problem-free future!
Ways to Reduce Debt
The first question that would come to your mind is how do you know if you have a lot of debt? There is that old joke which says that you know you are far too deep in debt when even credit card companies stop calling you. But a better way to find out the extent of your debt is to learn how to calculate debt-to-income ratio. This ratio finds out the extent of your debt as a percentage of your income and gives a fairly reliable extent of your debt. A ratio of above 43% is bad news and means that you have to actively start reducing your liabilities and take steps to get out of debt fast. A high debt ratio shows that your income is not going to be sufficient to pay off your debts and you'll have trouble getting loans when you really need them and moreover, you'll have to pay a higher rate of interest on the principal amount.
Managing Your Debt
Unfortunately, debt relief programs are going to take a big bite out of your present lifestyle. Debt relief options never advocate luxuriousness and will require a period of non-indulgence. Before reducing your credit liability, you first have to stop taking new credit. So all the credit card purchases have to stop. A debt-to-income ratio of above 40% means that you are spending nearly half of your total income in paying off old debt! Furthermore, you only have 60% income disposable for daily expenses. So this 60% will only barely suffice for purchasing daily necessities and luxuries will take a beating. This period of ascetic living will go on till you can successfully beat down your debt percentage to nearly 30%. If you can't keep it below 30% or your starting debt percentage is above 45%, you ought to seek professional debt management and credit counseling services.
Once you are able to bring your debt down to around 30%, you will start getting offers for cheaper financing. But don't get hasty! Wait for the best, lowest offer for interest on your debt before you choose to take it. But mind you, this debt has to be used very responsibly. You cannot afford to make another blooper on your credit history. Use this debt systematically, with a plan, to reduce your old debt. Since you got this debt at a lower interest rate, you can get out of this debt faster, because the interest accrued on this debt will be much lesser than it was on the previous debt. Paying off all your outstanding amounts will also dramatically increase your credit score and therefore your credit standing. If you are unable to reduce the burden of debt, or unable to form a plan which will help you in efficient debt management, it might be a good idea to approach professional debt reduction companies that can analyze your situation and suggest the best debt settlement program as may be applicable to your individual needs. But make sure you get the services of government approved debt relief companies, otherwise there are chances that you might get swindled by those who are out to make a quick buck at your expense.
But remember, after a successful debt consolidation program, you have to learn your lessons and manage your finances better in the future. Keep an eye on your debt-to-income ratio and make sure it stays in the manageable range. After all, debt reduction is a harrowing experience and I am sure you will not want to go through it again!
0 komentar:
Posting Komentar