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How to Deal With Debts

Updated on July 12, 2018
liesl5858 profile image

Dealing with debt is not an easy process but if you are determined and willing to put an effort into getting out of debt, it can be done.

How to Deal with Debts

How to deal with debts is easier when we have a little knowledge about debt. It does help just to know what happens to our debts and what we could do to avoid more charges and interest being added making our debts unmanageable when we can't go to work due to illness, redundancy, and other valid reasons. Since I was in debt, I learnt and read a lot about debt. Being in debt, had given me knowledge and valuable lessons which I treasure for life.

I can tell from my personal experience that it is so easy to get into debt and so hard to deal with it. But don't lose hope it is possible to be debt free, but we need to be focused and determined to get out of debt.

When we can't do it by ourselves, ask for help from trusted organizations like the CAB(Citizens Advise Bureau). We need someone to point us in the right direction to dealing with our debts. Because when we are in debt, it is so easy to get depressed and loss focus on how to deal with our debts. We just need a bit of guidance on how to go about our debts, once we have that then we can concentrate or focus on working out how to get out of debt.

I find that it is really better dealing with it by ourselves by learning how to manage our own money. But sometimes when we are in big trouble, we need some help that only financial experts can give.

8 Reasons why People get into Debt

1. Redundancy – is number one reason that some people get into debt in my opinion. It is unfortunate when it happens and a person is already in debt and have no savings. The repayments can't be met and the creditors start adding interest and over limit fees. When this happens, get in touch with the bank or creditors immediately especially when it concerns the mortgage repayments. Redundancy can not be predicted when it happens.

2. Illness – is unpredictable when it happens like redundancy. My debts accumulated when I was ill. When you become ill for longer periods, your bills accumulate and you find yourself in debt. When this happens, please get in touch straight away to your creditors to let them know.

It is important, that you let your creditors know immediately to prevent them from putting late payment charges and high interest fees on your account because this is what happened to me when I was ill. My debts went up due to over limit fees and for not paying at the right time or date.

3. Divorce - when people get divorced and find out that their partner, wife or husband has debts connected to their property they will be liable to pay as well especially if the husband and wife are joint owners of the house or flat.

4. Lack of knowledge about debt – like I was, but now I have learnt a lot about debt and is very useful to have a little knowledge about debt for when you will be in a situation like I have been. I became more careful and sensible about borrowing now.

5. Spending instead of saving first – people tend to spend and pay later but can you blame them when some furniture shop says on their offer "Buy Now Pay Later". It is hard to resist the offer when people like me got no savings to buy this furniture. Sensible people will save and buy this furniture though.

6. School Fees – students, although they are given grant by the government, they will be in debt before they finish school and before they get a job to pay for their grants or fees.

7. Natural disasters – like floods, typhoons, snow, volcanoes erupting and tsunamis can be reasons for people to borrow money to keep them going while they sort themselves out.

8. Wrong Financial Advice - some financial institutions like banks, credit providers, and even independent Advisers give the wrong advice to people about financial products like mortgages, insurance policies, credit cards and loans. I was given the wrong advice about my unsecured personal loan. Now I know that even with unsecured personal loan, the banks can still attach your debt to your property or anything of value that you possess.

Debt Files

my debt files
my debt files | Source

Dealing with Debt and 15 Different Ways of Paying off Debt

Dealing with your debt is not so easy but with strong determination, a budget and a plan to pay off your debt is a good start. Working out how much you owe and making a plan to be debt free is a way forward. Having a budget is very important when we are in debt. Draw up a budget and stick with it.

Sometimes when your creditor knows that you are in trouble they will sell your debt to a third person or they will pass your debt to a debt collection company who recovers debts. When they do this, they will write you a letter to say what had happened and they will let you know how much is left for you to pay.

The creditor or debt collector might even take pity on you and remove the interest and charges and only let you pay the capital amount. But for them to do this, you have to write, email them or talk to them on the phone. This is where communication is really important between creditor and debtor. Also when you are good at haggling and when you got the money to pay for all the balance, this is the time to negotiate with the third person who bought your debt. You can haggle up to half of the amount left for you to pay. It was a success for me when I did it.

15 Ways of Paying off Debts:

1. Gardening – growing your own vegetables, flowers and fruits helps you save money to pay your creditors. You don't have to buy organic vegetables and fruits thus saving you money or you can do gardening for others and get paid for it. If you have spare vegetables from your garden, you can sell them in the market stalls to pay off your debt.

2. Dog walking – if you like walking dogs, offer your services and get paid for it.

3. Selling Crafts and baking cakes – When you know how to knit and crochet, you can sell crafts on E-bay, Amazon or Craig list. Crocheted and knitted stuff are good sellers on the internet like baby hats, baby booties, baby clothes, mobile phone covers, scarfs, adult hats and many more. If you are good at baking cakes, you can sell them at work, or on your local town hall with market stalls on certain days or advertise on the internet like Facebook, Twitter and Pinterest or other social media that you join.

4. Taking on extra work or doing overtime at work. – Doing overtime at work certainly helps earn extra money to pay off debts. Offer cleaning and care work services in the community. Advertise your talents on local shop windows. Do cleaning and shopping for elderly people who can't get their shopping by themselves if you got a car or drive them to their doctor's appointments.

5. Writing articles or poems like here on Hubpages or other writing websites – offer your talents like doing translations, proofreading, article writing, transcribing and many more at Fiverr.com and Elance or other websites. There are endless opportunities on the web these days, you just have to find them. Do ″You Tube″ videos that earn you money. Write ebooks for Amazon or sell products for Amazon and become an affiliate and get commissions.

6. Give up the car for a while and use public transport – to save money on petrol, road tax, mot and car insurance. Public transport is cheaper than running a car. I know it is not convenient for others but sometimes we have to make cut backs when we are in debt. Once your debt is paid off, then you can use your car again.

7. De-clutter and sell stuff – have a clear out and sell the things that you don't need that is just gathering dust in the attic or just cluttering your home. Do some car boot selling.

8. Stop buying clothes and shoes – stop buying clothes and shoes for a while until debts are paid off, make do of what you got. Buy from charity shops, sometimes they sell new expensive clothes,bags and new shoes cheaply.

9. Stop borrowing – don't borrow any more to pay off your loans or credit cards. Cut up all your credit cards and save for things you want to buy. Never borrow from Payday Loans, their interest is too expensive to repay.

10. Stop or quit smoking and drink sensibly – I know it is hard to give up a formed habit but we have to make sacrifices when we are in debt. Cigarettes, tobaccos, and alcohol are expensive to buy and they ruin our health. Alcohol is okay as long as we drink in moderation. We need a little treat when we are in debt to keep us going.

11. Baby Sitting – start baby sitting for friends or people who have kids and get paid for it. There is quite a demand for babysitters and the pay is good as well. This can be done in your spare time if you have a main job.

12. Taking on lodgers or students – renting out your spare rooms or renting your garage or parking space in your home if you don't use it. If you just want lodgers occasionally, rent your room to students who will be with you during school time. We rented our spare bedroom for a few years and it helped us pay off our mortgage.

13. Do some private care works in the community – Lots of elderly people need someone to do their shopping or take them for hospital or clinic appointments or they just need some company for a few hours. It also gives you self satisfaction the fact that you are helping someone in need and earning money to pay for your debt.

14. Pet setting – sometimes there are people who go on holiday but they got cats or dogs and they need someone to look after them when they go away. It is a good way of earning extra money to pay off debts.

15. Change your job – if need be for a better paying job to get more money to pay off your debt.

Dealing with Debt

How do you manage your debt?

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How to Handle your Debts

Debts are good when you know how to handle them but it isn't good when you lost sight of how much you owe and don't know how much it is costing you each day in interest.

Debt becomes bad when you don't even know or want to know how much you owe to repay and even worse when you ignore the letters, emails or phone calls that your creditors send you. Working out how much you owe, is very important in dealing with your debt.

The important thing to do when you are in debt, is to communicate with your creditors(people you owe money to) instead of avoiding them. From my experience, some creditors were quite sympathetic and if they know you are really struggling they might even reduce the amount you owe them and stop charging interests and overlimit fees as well. But you have to inform them of your situation and let them know as soon as possible. Communication is really important when you are in debt. Even better when you are brave to haggle with your creditors for them to remove the interest and over limit fees.

When you receive letters from your creditors, read them and action them then file them. Do not squirrel them away because the debts won't go away. Do something now instead of later or tomorrow. Because it gets worse, if you don't do anything now. Sometimes, we say to ourselves, oh it is only a small amount but that small amount will become big amount if they add some interests, late payment and over limit charges on top of it.

Where you own a property - a car, motorbike, boat, a house or flat, the creditors will put a charging order on them, so that when you can't repay your debt, they will sell your property to pay for your debt. They have a right to do this. Obviously, they want to recover their money back . But they can't just take away your property or cars without going through the legal procedures.

Another thing that you have to do when borrowing money whether it is credit cards or bank loans is to read the small print on the loan or credit card agreement carefully before signing it. Because you want to know what happens if you defaulted or forgot to pay your credit card or loan at an agreed date and time.

I did not read the small print in one of my unsecured personal loans(big mistake) because I was led to believe that it won't affect my home but it did. Because according to the bank staff who offered me the loan, it is an unsecured personal loans but they have a way of attaching a charging order to your property if you default on your payments. I was given the wrong advice too.

I found out after being given a Court Judgement against our home. I had to go to our local County Court only for them to attach my debt on our home. I was not even given a chance to explain myself to the Judge. I just sat there, the Judge did not do anything or say something to me. The next thing I know I got a charging order to my half of our property. My debt is all been paid for and settled now. But I learnt that there is not much difference between an unsecured personal loan and a secured loan.

Another important thing to do is to draw up a budget so that you know exactly what is coming in and what is going out. Budget plays an important role in paying debts. The creditors will ask you to send them a budget plan. They want to know what you can afford to pay them. Also for your own benefit, because you can't send them what you haven't got. With a budget, you can see how much money is left to offer your creditor or creditors. I find this helped me a lot then and even now.

The Importance of Having a Budget.

To be able to know how much money is coming in and going out each month, we need to have a budget. In order to determine how much is left to offer to the creditors as well after paying the priority bills. When we are in debt, creditors would like to see our budget sheet. Also for our own benefit, we want to see if we got enough money to buy food, clothes and shoes that we need, to pay our utility bills and to pay our debts.

When we are in debt even if we got money coming in, we are allowed by law to pay our priority bills first before we offer the left over money to pay our creditors. Priority bills are your mortgage, council tax, food, clothing and shoes especially children's school uniforms. These bills got to be paid first before we offer some money left for our debts. The creditors know this by giving them your budget sheet.

The creditors won't take every penny you got when you are in debt. They will only get what is left after you paid your priority bills. And if your creditors start harassing you with your debts, you can report them to trading standards.

Some of the Creditors that I borrowed money from

Creditors
Customer Service
Recommend
Northern Rock
bad
no
Capital One
okay
maybe
MBNA
okay
yes
Northern Rock was not so helpful when I was ill. I was given wrong advice about my unsecured personal loan.Capital One were the first credit card provider that I went for. They are okay to deal with. MBNA is another credit provider that is quite good

Things to Avoid when You are in Debt

  • Avoid borrowing more money – stop borrowing more money to pay off your debt. Remember, you can only offer spare money to your creditors after you paid your priority debts or bills.
  • Avoid borrowing money from Payday loans company to pay off debt – these companies charge very high interest on the amount you borrow and also you have to repay them in a short time which costs you more money. Some payday loans company charge you double or more than the amount you borrowed.
  • Avoid ignoring letters, emails or calls from your lenders – always answer any phone calls, letters or emails promptly from your lenders. You will find that if you are honest enough, your lenders will be more sympathetic to your case. And if you can, try and negotiate with your creditors to stop charging you interest and over limit fees. This worked for me and saved me a lot to pay for my debt quicker. Communication is important when you are in debt.
  • Avoid delaying your agreed repayments with your creditors. – Always pay on time and on the agreed date to avoid further late payment charges.
  • Avoid borrowing from your relations or friends to pay your debt – it will only cause embarrassment and misunderstanding except if your relations or friends offer to help with genuine intentions then that is different.

How to Deal with Debt References

When I was in debt, I read a lot of books and magazines about how to be debt free. I went on the internet and read lots of websites that give advice on debts.

Here are the websites and magazine that I used when I was in debt and quite happy to recommend:

  • https://www.moneysavingexpert.com/Martin Lewis – I referred to Martin Lewis website a lot when I was in debt.
  • Prima Magazine - This magazine has a page that gives advice about Finance and Money.

© 2014 Linda Bryen

How to deal with debt

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    • liesl5858 profile imageAUTHOR

      Linda Bryen 

      8 months ago from United Kingdom

      Hi! Li-Jen, hope you are ok. Thank you so much for reading my hub about debts and thanks for your lovely comment.

    • Li-Jen Hew profile image

      Li-Jen Hew 

      8 months ago

      Hi Linda! :) Good article! Knowing where to get money - babysitting etc - resourceful! Haha, you're right about being honest. Creditors will sympathize. It's good that you shared how debts come about as well. :) Thanks for sharing.

    • liesl5858 profile imageAUTHOR

      Linda Bryen 

      3 years ago from United Kingdom

      We all have debts and I was one of them who had bad experience about it but I have to admit, I learnt some lessons from it.

    • monia saad profile image

      monia ben saad 

      3 years ago from In my Dream

      Oh Debts ! well debts were the worst thing i've ever done , Getting a debt made me fell worse , cause i hadn't a goal for it , in fact i used it nowhere and it ended , now , refunding and living hardly . I really don't advice people .

    • liesl5858 profile imageAUTHOR

      Linda Bryen 

      4 years ago from United Kingdom

      Thank you CrisSp for your kind comment. I hope it helps those who are in the same situation as I was years ago. You are a sensible lady so keep it that way.

    • CrisSp profile image

      CrisSp 

      4 years ago from Sky Is The Limit Adventure

      What a sensible hub! Thank goodness I have no vices like smoking and drinking. I also don't go crazy on shopping now not like in my younger years. I also love the fact that I wear uniform at work. Saves a lot of money from buying clothes. :)

      Great, useful, well written and well explained hub. Up and passing it along.

    • liesl5858 profile imageAUTHOR

      Linda Bryen 

      4 years ago from United Kingdom

      Thank you Seckin for your kind comment. Hope it helps someone else.

    • Seckin Esen profile image

      Seckin Esen 

      4 years ago from Ankara, Turkey

      This is a great hub liesl5858. Thank you for sharing such valuable suggestions with us.

    • liesl5858 profile imageAUTHOR

      Linda Bryen 

      4 years ago from United Kingdom

      I think parents should start teaching their children how to budget, so that when they are in school they will learn more about the value of money and learn how to use it wisely. Some kids are sensible enough about money but they need to be guided all the time. I feel sorry for the young ones now, I don't know what kind of future they are going to face. Hope the economy improves for the U.S. and U.K.

    • AOkay12 profile image

      AOkay12 

      4 years ago from Florida

      It is happening here in the U.S. but it will only grow worse. The laws need to change to protect the young people and educate them about the dangers of debt.

    • liesl5858 profile imageAUTHOR

      Linda Bryen 

      4 years ago from United Kingdom

      I think student loan crisis started already, as lots of students are graduating from college or university but there is no job for all of them. Then their debts will become bigger and bigger. They will be in debt even before finding a job to pay for their loan. And even if they found a job, they will be just working their butts off to pay for their loan which is not fair. Sad but it is happening here in the U.K. Thanks again for your comment, AOkay12. Thank you for the book suggestion, I must find it and have a read.

    • AOkay12 profile image

      AOkay12 

      4 years ago from Florida

      The mortgage and real estate industry contributed heavily to the Great Recession and financial crisis. There is a good book about this subject by John Lancaster called "I.O.U.: Why Everyone Owes Everyone And No One Can Pay". I think that there will be another financial crisis due to the student loan industry, but that's just my opinion.

    • liesl5858 profile imageAUTHOR

      Linda Bryen 

      4 years ago from United Kingdom

      Thank you, AOkay12 for your kind comment. I think the U.S. and England were lending money recklessly and then both countries went into recession and now it is not easy to take out a loan. And I think you are right about identity thief, thank you for your input. I am sorry to hear about your sister being a victim of identity thief.

    • AOkay12 profile image

      AOkay12 

      4 years ago from Florida

      Before the economy went bad in the U.S. banks were lending money and extending credit to people freely. Now, it is really difficult to get a loan without income, collateral and good credit.

      Some people are in debt due to identity theft and their credit is ruined because of it. Someone took out a credit card in my sister's name, without her knowledge and it is reflected on her credit report.

      You mentioned, divorce. I hear that money is one of the leading reasons that people end up in divorce.

      Thanks for all these great tips.

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