The typical English response to any sort of crisis is to put on a stiff upper lift and ignore what is happening. And though this may be a fantastic resolution for the war effort, when it comes to debt management, walking away from your financial problems in fear will not make your demons go away, in fact it could make things a whole lot worse.
Whether you borrow from a friend or a large conglomerate, the basic principal is just the same. A loan provider has offered you a certain amount of money on the understanding that he will not only receive his initial sum back but also a level of interest that will make his actions profitable.
But when you get into trouble and can’t live up to the agreement, it is your responsibility to face up to the situation in hand and work with the lender to find a resolution.
Most people know long before they receive their first red letter that they are in financial difficulty. But when the first red letter arrives, this is the indication that your lender has also become aware of the possibility of you starting to experience financial problems and is a way of flagging up that there could be issues in the future.
As soon as that letter arrives, it is time to sit down, face facts and work out how you are going resolve the situation before it gets any worse.
And the hard part is, once you start receiving these letters, the penalties that are applied and possible increases in interest rates that occur, can make the situation even worse so the sooner you start work, the easier your problems will become.
1. Reassess Your Budget
When the income and expenditure in your house no longer match, the first thing you should try to do is reduce your outgoings. It could be that you could reduce the amount you spend on luxury items or pull in your belt to make ends meet.
Look at your supermarket budget – could you buy cheaper alternatives of the products you buy? Could you car pool and reduce your travel costs as well as being kinder to the environment or do you need to reassess your monthly utility bills by switching to a cheaper supplier?
2. Priorities Your Outgoings
When it comes to what you pay out each month, try and maintain control so that you can clearly look at what needs to be paid first.
Loans and credit agreements carry heavy penalizes for late repayment so put these at the top of the list rather than hiding them at the bottom.
The milkman may stop delivering your milk if he doesn’t get paid but that won’t affect your credit rating half as much as ignoring the calls from the bank.
3. Reassess Your Debt
If you have done everything to reduce your general expenses but the ends still do not meet, then consider reassessing the loans you are paying.
Simply by facing up to your situation early and following these three simple steps, you can take the fear out of your financial situation and may even progress into a more positive outlook sooner than you think.
Use a comparison site such as LoanRater to see if you could obtain a more competitive with cheaper monthly repayments to cover the same amount or consider transferring to a Debt Consolidation Loan that would combine all your outstanding payments into one manageable sum.