If you’re struggling with debt problems it can seem like you’re trapped in a never-ending fight to keep your head above water, desperately juggling your finances around to keep your creditors happy. It can also seem like you’re alone in your struggle, but this is very far from the truth. Millions of people have at one time or another been in a similar situation, and even though it might currently seem like there’s no way out, millions of people have successfully left their debt worries behind.

There are thousands of sites on the internet offering help and advice, sometimes as a free service, but often as a commercial venture which you’ll have to pay for in one way or another. With all this information overload, how can you even get started on deciding how to handle your debts? Read on to learn the basics of some of the most popular debt strategies, which will help you decide which strategy is right for you and is worth researching further.

Budgeting

This is the most basic way of getting your finances back in shape. By sitting down and working out all your income and expenses, you can clearly see the parts of your money management that need more attention. Often, this basic step will show up easy ways to economize, giving you a little more breathing space every month, and making it easier to pay those bills.

Debt Consolidation

If, after examining your budget, you find that you really can’t make ends meet, then it’s worth considering taking out a consolidation loan. The basic idea behind consolidation is to take out one big loan which you use to clear all your other debts, meaning you only have one repayment to make every month. Ideally, your new loan will be at a lower interest rate than your current debts, so your monthly repayment will be lower. You can also spread the repayments over a longer period, taking some of the financial pressure off, but this will mean you’re paying more in interest in the long run.

Debt Management

Some people who have serious debt problems might not be able to arrange a consolidation loan. This might be because they’ve already borrowed to the hilt and no lender is willing to advance any more credit, or it may be that in the course of their debt problems their credit rating has been badly damaged. At this point, debt management is a good option. It works by handing over the management of your debts to a specialist company or agent, who will contact your creditors on your behalf and negotiate a way forward, such as lowering interest rates, extending the repayment term, or cancelling previous fees and charges.

Entering into debt management has the great advantage of relieving the immediate stress and worry of dealing with your debts, but the disadvantage is that in most cases the management company will charge a fee, and the damage to your credit rating will be considerable.

Individual Voluntary Arrangements

This is a step further than debt management, in that the agreements you make with your creditors are legally binding. You will also have any remaining debts cleared after keeping to the arrangment over a period of five years. Should you fail to keep to the arrangement, then bankruptcy is the only remaining option.

Bankruptcy

This is the final step to take when all other attempts to handling your debts have failed. All your assets will be frozen and used to pay off your debt, and most of any income you receive during your bankruptcy period will also be taken from you. The damage to your credit rating will be almost irreperable, and even though many people have started to see bankruptcy as an easy way out of debt, the long term consequences are grave, and it should only be considered as an absolute last resort.

Although it would be wonderful if debt would magically disappear, the only way to get rid of it is to pay it off. Almost everyone has some sort of debt.

Although getting rid of debt is not as simple as accumulating it, there is a way you can put a stop to the downward spiral. There is a three step plan that can eliminate financial problems for everyone. The three steps to solving your debt problems include: inventory, prioritize, and rollover.

Take Inventory of All Debts Owed – Make a list of all credit cards, personal loans, student loans, car loans, etc. Next to each line item, list the interest rate and minimum payment required. After you have come up with all creditors, rewrite your loans in a different order. This time, line them up starting with the highest interest rate loan and ending with the lowest interest rate.

Prioritize Your Debts – The next step, is fairly simple because most of the work is already done for you. Each month pay only the minimum payment on every single loan except for the loan at the top of the list. The loan at the top has the highest interest rate, and therefore, is costing you the most unnecessary money. Every time you get any extra cash in the month you put it towards this loan and this loan only. You will find that this loan will quickly diminish until it has disappeared.

The Rollover Strategy – Rollover is the next and final step to the debt elimination system. Once the first loan on your list is paid off, simply rollover ALL the money you used to pay for that loan and roll it over to the next item on your list. This should be the loan with the 2nd highest interest rate. Each time you pay off a loan you add more money into your payment pot. This makes the next loan all that much quicker to eliminate. It becomes a snowball rolling down the hill, picking up more snow and more positive momentum.

If you are in a situation where you need help solving your debt troubles, this system does work. The best thing you can do for your financial future is to take the bull by its horns and proactively work on solving your debt problems.

Sometimes when we’re in a bind and need some extra cash, we forget the options we have available. Before you panic about your lack of money, keep in mind some of the ways you can solve your problem.

Here are six solutions, with the advantages and disadvantages of each one.

1)Borrow from a friend or family member

You may have loved ones who will help you out in a time of need, no matter what your situation is. In that case, this is probably the first solution to consider.

The advantage is that you don’t have to fill out applications, have your credit checked, or deal with a company that may charge you high fees. In fact, your friends or family may not charge you any interest for making you a loan (but it’s polite to offer them something, even if it’s just to do them a small favor).

One big disadvantage to borrowing money from someone you know is that they want to know why you need it, and you may have to explain your situation. That’s not always easy to do.

Another disadvantage is that word may get around, if they can’t keep your problems to themselves. Even friends and family like to gossip about their loved ones.

Also, you may have to listen to all their advice about how to save more money, how to get a better job, what to do with your life, and every other “helpful” bit of information they feel a need to tell you. But that’s just the price you pay for borrowing money from people you know.

Finally, the biggest disadvantage is what could happen if you can’t pay back the loan — or can’t pay it back quickly enough. That could ruin your friendship or family relationship, so consider this carefully before borrowing money from them.

2)Pawn something or hold a yard sale

You may have some things you don’t need. In that case, why not sell them to make some money?

If you have something of value that you’d like to keep, and you think you’d have the money soon to buy it back, you can try pawning it. The danger there is that you won’t have enough money in time to get it back.

If you have things you want to get rid of, you can try holding a yard sale, sell your items through the newspaper, or even sell them online on eBay.

The disadvantage is that you don’t know if you’ll be able to sell your things, and it may take some time. Also, you may have expenses involved if you have to run an ad in the paper.

3)Ask your creditors for more time to pay your bills

This isn’t exactly getting cash. It’s more like getting a temporary stay of execution. Still, it may help you get past a temporary cash crisis.

The advantage is that you don’t have to get a loan or sell your valuables. Instead, you just ask for more time to pay your bills. Some creditors may be willing to work with you and arrange a different payment plan.

The disadvantage is that your creditors may charge you for this service. And you still may have to pay late charges or higher interest rate. Or they may just laugh in your face for asking. But it’s worth a try.

4)Get a cash advance on your credit card

The advantage of this is that you don’t have to talk to anyone, fill out an application, or get approved. You’re borrowing money from the credit card company, and they’ve already approved you for a credit line up to a certain amount.

Of course, this solution assumes you have a credit card, that you haven’t maxed it out, or that you’re willing to pay the high fees and extra charges. Typically, credit cards charge a “transaction fee” for a cash advance and they charge a higher interest on cash advances than they do on normal purchases. That’s one disadvantage.

Plus, a lot of us don’t have clean enough credit to get credit cards. Or we just don’t want to be sucked into the world of yearly “membership” fees, or worry about late charges if we miss the payment deadline by a few hours. And some credit cards charge huge interest rates. You can end up paying hundreds of pounds for the “privilege” of using your credit card.

5)Get overdraft protection on your bank account

With this service, the bank covers any checks you write where you don’t have enough money in your account.

The advantage is that you avoid paying fees for bounced checks. It gives you a bit of a cushion.

The disadvantage is that you still end up paying fees. But instead of paying fees for bounced checks, you pay fees for the bank to cover your overdrafts. And that can cost you a bundle!

Some plans have fees as high as 35 per overdraft. What this means is that the bank is really making you a high-interest loan. That is, they charge you for the use of their money (by covering your check when you don’t have enough in your account). And they may only cover you for a few hundred pounds. After that, they start bouncing your checks.

It can be good to have overdraft protection for when you accidentally write a check when the money isn’t there. But don’t use it as a roundabout way to get a loan from the bank. You’ll end up paying too much for this.

6)Get a loan

Once you’ve tried other ways to raise the money you need, you can try getting a loan from your bank or through companies that offer payday loans (also called check advance loans or cash advance loans).

Getting a loan from your bank can be the better choice because you’ll probably be able to borrow the money at a good interest rate, and you don’t have to pay it back right away.

However, this can be the most difficult loan to get. Banks prefer to make loans to businesses, or for specific projects such as a home improvement loan. They rarely give loans to people who just need some cash to tide them over until next payday.

That’s where payday loans come in.

A payday loan company will advance you some cash right away, and you don’t have to pay them back until your next payday. The disadvantage is that these loans are only for people who receive a regular paycheck or benefit check.

The advantages are:
- You can get the money quickly, deposited right into your checking account.
- If you apply online, you don’t have to talk to anyone or tell them why you need the money.
- If you can’t pay back the loan on the next payday, you can roll the loan over until the following payday.
- They usually don’t care about credit problems, only that you can pay the loan back.

While payday loans aren’t for everybody, they are something to consider if you need to get some cash now. Just make sure you’ll be able to pay the loan back fairly soon.

Short term debt problems are manageable problems associated with temporary job loss, sickness, a large one off payment which may leave you short for a month or two or you just have a lot of small out of order debts, which you need to take control of.

Below are just a few things to take into consideration when evaluating your credit situation.

Prioritise your Payments

Prioritizing your payments is a very important step. You must choose the creditors that are most important to you e.g. your mortgage payment and your utility companies.

Next are the credit cards and store cards which charge the most interest, by paying off the cards with the most interest you can reduce the amount of interest calculated on your next bill.

Try to clear some of the smaller bills first. Although it seems like there is not a lot of interest amounts being paid on them, it still adds up. Clearing some of your smaller debts gives you encouragement to set to work on the others.

Transferring your credit card balance onto another card, with a 0% interest period is also a recommended action. This allows the full monthly payment to be deducted from your balance, without incurring any interest.

Always remember to pay off your debt with any available money you may have at the end of each weekmonth. Doing so prevents any arrears and a build-up of interest on credit cards and store cards.

Can you improve?

Improving your situation is one of the best ways to acquire extra money. Try to think of ways to maximize your full income e.g. is it possible for you to work more overtime, can you claim any benefits, and do you have anything of value to sell? Also can you afford to cut back more? A drastic measure is to move to a smaller house and pay less mortgage or less rent, however this is a worst case scenario.

Contact your creditors

If you are experiencing money problems, do not be afraid to contact your creditors as they will try to help you. Due to the process the creditors have to go through to get money from you if you do fall into serious money problems, it can work out quite expensive to your creditors. Contacting them could lead to negotiating a new payment plan.

Before contacting your creditors, make a comprehensive list of all the outgoings and a realistic amount that you can pay each month. After you have completed a list of out goings, make a list of all creditors remembering to prioritize from most important to least important. Upon completion of this list, prepare a formal letter explaining your situation and proposing your payment plan.

When you receive confirmationacceptance of your proposed plan (or something close to it) always keep your creditors informed of your progress. This process is a long drawn out process and you will have to prove to your creditors that you are struggling with the upkeep of your payments.

Cut backs

You will be surprised on what you can save on when you cut back. Make a list of all of your current out goings, this includes all your shopping, hobbies, magazines, news papers, treats, everything. When you have produced your list, take a look at it and remove all essentials

From this list also look at the brands of shopping you buy, you can save money buy using a cheaper brand.

The items you have left on your list are obviously non essential to you, therefore can be excluded from your weeklymonthly expenditure. You will be surprised to see how much you can save from this simple money saving technique. However you do have to be tough on yourself when excluding non essential things, think to yourself do I really need it.

Choose the best rates

If you still have a good credit score and still have the ability to be accepted for a loan, then try switching your outstanding credit to a new loan or credit card.

Search the internet, local papers and magazines, even keep an eye on the adverts on your TV, there are hundreds of creditors offering 0% interest on credit cards. Try doing the same for loans too. It is very unlikely you will find a 0% interest loan, however there a lot out there with rates from 5-9%.

Switching credit cards and loans will save you money on increased interest rates. Look at the big picture over the long term; you will save 100s on interest.

Consolidate through your mortgage

It is possible for you to consolidate your debt on to your mortgage. However doing so does increase the interest you will pay drastically. Imagine you have debts of 10,000 over a five year period. You wish to add this to your mortgage over a period of twenty years. The interest accumulated over five years will be significantly less than the accumulated interest over twenty years.

You must also be sure that the value of your property is significantly more than the amount of your mortgage. Negative equity on your home can lead to problems.

Consolidate with a loan

Consolidate through a loan. Quite like putting all your eggs in one basket so to speak. Then there are a few scenarios you may want to consider:

How much do I want to pay out?
Do I want to take the loan over a shorter term and pay my debt back faster?
Do I want to take my debt over a longer term, pay more interest but take a lower payment?
Am I going to stick to the loan and not get into more debt?

If you are aware of these simple scenarios then a consolidation loan is recommended. It is cheaper due to one amount of interest paid instead of multiple amounts. Also you will find your money easier to manage due to the one single payment every monthweek.

Do pay particular attention to the term of the loan you require, it is better to pay the loan back sooner rather than later. Try to find an amount you are comfortable with. It is easy to take the lower payment over the longer term, which allows you to have more expenditure. However, is this option a sensible one? More interest, longer term, more to pay back. You would be better with shorter term, less interest, less to pay back.