In the current financial situation when every business is under extreme stress,there is a shortage of credit everywhere,if you are in debt you are in really bad position.I am no financial guru or expert who can take you out of your problem,but I am a common man who can share with you certain techniques that I have read and practised myself.We will not dwell into questions like why and how we get into debts,because everyone does mistakes in life and nobody is perfect.Now that we have already done the mistake and slided into depths of depth,lets do things correctly and try to get out of it and take the tougher path upwards.I will illustrate in indian rupees.Now think what all are your problem points?Personal Loans,Credit cards etc right?Let's take first the example of a personal loan.

Personal Loans

When you take a loan you are told that you have a monthly installment or EMI(Equated Monthly Installment) of say Rs X and you have to pay the same for 4 or 5 years.You start paying the EMIs,everything goes well and fine and suddenly you have enough money and you decide to clear off the loan.You call up the bank and ask them what is the Principal amount left and if I want to close the loan how much I have to pay.The amount you hear you cannot believe,even though you had paid the EMIs regularly,the principal has not come down a lot and then there are foreclosure charges.You wonder how it is possible.Well let me explain that,the interest curve(the amount the bank charges every month as interest) is always from maximum to 0.So the first EMI you would have paid has a very high proportion of interest and and very less proportion of Principal and the last EMI in most cases is only principal.So if we take an example and assume our EMI is Rs 5000 so the first month the interest cleared will be very high say around 4000 and reduction in principal will be very less say only 1000.This is the reason when you suddenly decide to close a loan the amount is not always what you expected but sufficiently higher.

Credit Cards

Credit Cards are the biggest reason of taking a person to a point from where it is very difficult to come back to normal life.The reason being the interest rate is normally very high and there are many additional charges because it is basically an unsecured loan.There are many traps that you may fall in like the minimum payment.Believe me paying the minimum amount due is not going to take you anywhere.If we take an example say if you have 50000 in credit card and if you pay every month only the minimum amount due it may take you more than 5 years to clear it off and by that time you would have paid a huge interest.

Now what do we do if we already have done the mistakes?

Step 1.The first and the foremost thing is accept that your situation is serious and list down all your debts.Check where you owe most and where you owe least and what is the interest you are paying in each of them.

Step 2.The second thing is see if you can arrange or borrow some money from your close friends which you can pay back over a period of time.The reason I am saying this is because then you do not have to count on how much interest you are paying because if you have good friends they will most likely try to bail you out of the situation.Let us suppose you succeeded in arranging some money but not all.Take out the list and see which is the loan/card you are paying highest interest and then try to clear that one.You may not be able to clear the whole amount but definitely a part of it.Take the amount you save monthly by paying a part or whole of the highest interest loan/card and then put that extra amount in the one with the second highest one.Continue this process

Step 3. Lets assume you could not do step 2 that is you could not arrange money from your friends/family,then see if you can reduce your expenses and sell off certain assets that you have.Like sell off the house and stay in a rented/leased one for certain period of time.It hurts but do we have a other way?We are already bleeding and we need to stop that.See if the money that is generated out of selling off the asset solves some or most of your problems.

Step 4. If Step 3 also fails,see if you have till now a somewhat Ok credit record and if you can get a loan that will be of lower interest rate than your existing loan/card.In credit card cases,it will work for sure as the interest rate for credit card will be much higher than personal loan.So take a loan and clear off your card.

Step 5.This is a different technique all together.It is called as snowballing.Check where you owe the least.Try to clear off that while paying at least the minimum amount due for all other loans/cards.Whatever extra amount you have in hand,put in the one that you have marked as the easiest to close.The day this one gets closed check out what is the next one and put the amount that you save monthly from closing the first one into the second one.Repeat it till you reach a comfortable position

Remember all the above techniques work only if  you are sincere and follow them strictly like paying at least the minimum due on time for all loan/cards other than the one you are trying to close(for this one you are anyways trying to pay more than the amount due).See what all you can do in you free time to earn a bit more extra so that the pressure eases on you.

You can do it!!!