When you're burdened by bad debt, it becomes a major stress factor in your life. But try to see it as a "positive" rather than a "negative."
It's at this time that most people wake to the realization that financial discipline is one of the most important things they can master. It's at such a time that you will be motivated to make some of the best decisions regarding financial management.
Here are five steps that will help you become debt free.
1. Take stock of the situation. This means that you need to work out a budget and try as best as possible to maximize the amount of funds you have left on hand for payment of bills.
While making your budget, you need to minimize your expenses to a Spartan level, so that you can raise money for repayment of your debts. It's very important that you're able to close all your debt accounts to the satisfaction of your creditors.
2. Re-negotiate with your creditors. Most people avoid this solution because they are afraid they will be refused or worse, rebuked, or marked as bad debtors. But contrary to popular belief, most creditors will be willing to re-negotiate the terms of a loan in order to ensure their money will be repaid.
You need to convince them of the extenuating circumstances you're facing, and of the fact that you're eager to honor your commitment and repay the loan. The re-negotiation will greatly help the crisis by relaxing the most demanding of the terms.
3. Re-finance your debts. Let's look at the worse possible loans – credit cards and home mortgages. Credit card outstanding debts are especially bad, because the interest rates on these debts are in the neighborhood of a whopping 3 percent per month compound interest! Home mortgages are also bad, because they can lead to foreclosure and loss of your home.
You need to first see that these loans are repaid on schedule. Wherever possible re-finance these loans through creditors that offer better interest rates. Credit card payments can ruin you financially if not controlled in time.
4. Add to your income. This is often easier said than done, but it's another very important step towards becoming debt-free.
Ensure that your time is organized best, so as to allow you the time to take on a few extra jobs. This can be something on the Internet, a few errands in your neighborhood, a few hours per week overtime, and so on. Look closely at your budget, and work out a plan to add at least 25-35 percent to your income, so that you can extricate yourself from debt sooner.
5. Look up a reputable credit repair agency. There are many of them, online and off. Choose one that is affiliated with the Ethical Credit Repair Alliance (ECRA) so you can be assured of the highest quality of services. A credit repair agency will give you good advice and counseling regarding how best to handle your debt, but they will also help you keep your credit score high!