Pointers to Help With Credit Problems

In Credit Repair of CreditGuru (May 26, 2009 2:02 pm)

Once you have decided that you are definitely going to make a considerable effort to lower the amount you owe in debts the first thing you will need to realise is that you do not need to accumulate any more debts.

 

It is therefore vital that you re-evaluate your spending habits: it is important to be aware of the types of products you purchase, such as non-essential items, and how you pay, for example credit cards.

Get into the habit of only buying what you can pay for by cheque or cash, also bearing in mind the following pointers on dealing with your debts:

1. Maximize the handling of your spending and saving: In maximizing the handling of your expenditure you will be clear on where you need to apportion your income.

 

You can give priority to your essential expenses and you can determine where to divert other money to pay off your debts. You also need to understand that unless you somehow make more than 12% interest on your savings you will “earn” more by paying off your debts (which may charge between 12% and 24% annual interest) rather than leaving the money in the bank.

Did you know that you can take 21 years and 11 months to pay a balance of £1750.00 on a credit card with 18% interest if you pay only the minimum monthly payment? This means that the total interest paid over that term would total around £3647.00.

If you were to allocate an additional £25 towards your monthly payment you would eliminate nearly 19 years of that debt. Therefore, considering the additional amount repaid each month, totalling £588.00, you would make a saving of £3059.00 on interest.

2. The objective is to reduce the financial cost of debt (the amount of the payment that is going to cancel out the interest) and contribute more to the payment of the capital. So you will be out of this debt in less time, and accelerate these payments.

Compile a list of your debts, making a note of minimum monthly payments and rates of interest; make comparisons between interest rates and then transfer those balances to where you pay the highest interest.

Manage your money by transferring debts with high interest rates to somewhere with the capacity for lower rates: e.g. credit cards with promotional interest rates.

Find out if there are other sources of funding to pay your debts more effectively. An alternative could include affiliating your debt with your life insurance, incorporating cash values on interest accumulated at rates of 6% or less.

3. Have you considered whether it makes sense to put your debts under one roof? That is, if you must combine in a single loan all your debts as collateral by delivering the equity in your home.

4. Contact your creditors immediately if you think you will have problems paying on time for an extended period. Clearly explain the situation you’re in and your commitment to meet the terms of your agreement; they are in a position to possibly offer you help, since in doing so they will be enabling you to meet your obligations.

5. Make use of the services of credit counsellors when you cannot personally handle your debt problems.

6. In occasional instances some individuals may need protection through existing legislation surrounding bankruptcy, and whilst unpleasant, it may be the most beneficial for the individual in the long-term.

7. Know the laws that protect your credit rights, these laws exist to prevent abuses by creditors.

 

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