A Road Map for Routes out of Debt

Written by on September 14, 2012 in Money - No comments | Print this page

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getting-out-of-debtAnyone who has never had debt has not only led a blessed life, but there is a good chance, they have never had many of the luxuries that we enjoy in the modern world. Even our Sky TV and our Internet is provided on credit, which is just one form of debt. Most people will never need to worry about covering the household bills because these are manageable in most cases. It is when the lines of credit we can access get out of control that debt really becomes a problem. At first, it is nice to have access to plenty of credit, but excessive credit can become a problem down the line.

What is the Difference between Debt and Bad Debt

Some debts that are easily managed because they are within the limits of monthly income and we all have these kinds of debts in order to function on a day-to-day basis. It is only when we cannot afford to cover the debts, do they become bad. Bad debt is debt that we have defaulted on for some reason or another.  When you fail to pay a monthly installment on a debt, this is known as a default. If you pay the following months payment, you still owe the payment for the month before. Paying the following month’s payment does not mean you are now operating at a month behind your agreement, it means you still owe the month you missed. If that payment remains unpaid for a certain amount of time, your creditor can take you to court to recover the debt. If you are paying regularly, this is unlikely to happen, but make another mistake further down the road and you could find yourself in trouble.

Selling your Bad Debts

It becomes worse when your debt is sold on to a collection agency, because the collection agency will add their own charges for letters sent and collection visits to your property. Collections agencies purchase what is known as bad debts from creditors at a reduced rate and they employ tougher tactics to recover the money. There are no short cuts to getting out of debt, but there are good ways to deal with debt and there are not so good ways. In the end, your debt will need to be paid and the quicker you try to deal with money problems, the smaller those problems are in the long run.

How to Get Out of Debt

If you are serious about getting out of debt, there are a number of routes to take. Bankruptcy is not really an option for someone who wants to lead a normal life again at some point in the future. If you speak with your creditors instead of avoiding them, you may find that you can come to an informal agreement to repay your debt over a longer period. The next option is an Individual Voluntary Agreement (IVA). IVAs arranged by specialist debt management companies who contact your creditors and agree repayment schedules to get you out of debt are a good way of facing up to facts. There are costs to pay to the company that organizes your IVA, but they are usually a reasonable amount for peace of mind.

Using Debt Management Companies

Debt Management Companies (DMCs) are able to help with non-priority debts by contacting creditors and arranging a set monthly amount to repay your debt. Non-priority debts are those that are not secured on anything or do not put you at risk of losing your home or being put in jail. These are debts like credit cards, loans and overdrafts, which may be causing you problems because of mounting interest charges each month. A similar way of removing the high interest charges and reducing your monthly outgoings is to use a debt consolidation loan. This is a loan taken out over a longer period, but with significantly lower payments. This improves your disposable income and there is a definite end to the debt you find yourself in.

This is a guest post.   Debt consolidation has been the preferred route to a debt free life for many years and this helps you retain a control over your own finances. Other arrangements can be detrimental to your ability to access credit in the future. 

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