How to Deal With Debts
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 reasons. Since I was in debt, I learnt and read a lot about debt. Being in debt, had given me knowledge and 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 family members (even just for moral support), trusted friends and trusted organizations like the CAB(Citizens Advise Bureau). But I find that it is really better dealing with it by ourselves by learning how to manage our own money.
The thing is with the introduction of credit cards and personal loans, it is so easy to borrow money. I noticed that since those offers of credit cards and loans were introduced, many people including myself got into debts because of it.
The bank won't even do a check on credit files to see if people are capable of repaying the loan or not. All they are interested in are their massive profits. Bad advice from bank staff also contributed to people taking the wrong kind of loan or credit cards and getting into debt.
A lot of people got into trouble because of bad advice given to them about endowment policy as well. Even banks were penalised for giving the wrong advice and they had to give some back money to people, when people complained to the Ombudsman and Trading standards about miss-selling of endowment policies and giving the wrong advice to customers.
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.
How to Deal with your Debt - 15 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 them 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, crochet, you can sell crafts on E-bay or Craig list. 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. Crocheted and knitted stuff like hats, shawls, scarfs, slippers, bags, baby clothes and booties are also good sellers on the internet.
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.
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. There are endless opportunities on the web these days you just have to find them. Do freelance work like translations, proof reading, writing articles, etc. on Elance. Do You Tube videos that earn you money. Write ebooks for Amazon or sell products for Amazon and become an affiliate.
6. Give up the car for a while and use public transport to save money on petrol, road tax and 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 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 for a while until debts are paid off, make do of what you got. Buy from charity shops, sometimes they sell new expensive clothes 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 smoking and drink sensibly – I know it is hard to give up a formed habit but we have to do it if 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. Start doing baby sitting for friends or people who have kids and get paid for it. There is quite a demand for babysitters.
12. Taking on lodgers or students when you have spare rooms or renting your garage or parking space in your home if you don't use it. 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.
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?
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. Or not answering the phone when your creditor calls you.
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 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. But they can't just take away your property or cars without going thru 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 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 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. It is all been paid 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.
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.
- 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 them to stop charging you interest and over limit fees. 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 and time to avoid further charges.
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.
How to deal with debt
- How We Paid off Our Mortgage in Ten Years
Paying off your mortgage in ten years seems an impossible task to do when you get a mortgage but it is doable if you put your mind to it. We put so much effort into paying off our mortgage early.
© 2014 Linda Bryen