Top 10 Tips for Reducing and eliminating Debt.

1. Don't Ignore your debt problem in the hope it will disappear.

It is a mistake to try and forget or ignore the problem of debt. It may seem unmanageable, but if you take a clear and focused attitude you can regain control and work out how to best manage the existing debt.

2. Always Try to Meet Minimum Payments.

It is very important to maintain the best possible credit rating. Therefore, it is important to make minimum payments on time. If it is a real problem, speak to your loan company and explain the situation. At least, you may be able to miss a payment, with less damage to credit rating.

3. Debt Consolidation.

There are various ways to consolidate debt. However, the basic rule is to try and pay off debts with the highest interest rate first. It may be possible to consolidate high interest debts into a lower interest debt. If possible, this avenue should be explored. If you own a house, you will be able to have a secured debt consolidation; this will have a lower interest, but at the same time, means your house is liable to repossession should you fail to meet debt payments.

4. Debt Counselling.

If you find your debt very stressful and you don't know how to manage, it is advisable to speak to an independent debt adviser. A good debt counsellor will be able to look at the problem with less emotion and more detachment; with their experience they will be able to suggest various options to reduce and eliminate debt. Often an independent counsellor may be more appropriate than friends and families as there is less emotional attachment.

5. Debt Settlement

This is a potential solution for those with very large unsecured debts. It is a solution with debt settlement companies find an agreement to reduce your debt. They negotiate with your creditors to pay upto 50% less than your total debt. The debt is then said to the "settled in full" . There are potential drawbacks of debt settlement, for example, it will have some impact on your credit rating It is not something to be entered into lightly, however, it can be a much better alternative to bankruptcy. See: Debt Settlement

6. Increase Income.

A second job is a way to be able to save extra money. This can be used to actually reduce your total debt, rather than just adding to your debt. In the long term you will save twice; not only will you benefit from reducing your debt, you will also save on interest payments.

7. Reduce Spending.

If we look closely at our spending, we may be suprised at where our money goes. For example, the TV programme, big spenders, showed in graphic fashion how much people were spending on inessential items. One girl, was spending £2,000 a year on take away coffee and pastries. In the majority of cases, those with large debts seriously underestimated the amount they spend on certain things. If you make yourself write down what you spend your money on in a week, you may be surprised at where you can easily make savings. Not only that, but people found they were much happier for reducing inessential spending.

8. Don't Panic.

Why is the Hitchhikers Guide to the Galaxy the best selling book in the universe? Because it has in bold letter on the front the reassuring phrase "DON'T PANICn" When we panic we magnify our problems, and take a negative attitude that the problem is insolvable. This is not the case, if we are determined to improve our situation, we can start to make a dent into our debt problems.

9. Remortgage.

For those who are home owners, remortgaging enables a consolidation of debts into a low interest loan (mortgage). This is a good option; however, you need to be careful you can meet the repayments. A fixed rate mortgage may be a good idea to make planning easier.

10. 0% Credit Cards.

If your credit rating enable you to take out new credit cards, take advantage of cards which give the option to transfer large amounts of debt to a 0% or low interest bearing card. If some credit card companies refuse you, don't give up. Keep trying, some credit cards accept worse credit ratings than others.

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4 Comments:

Anonymous OneAdvice said...

These 10 tips for reducing debt are really useful and straight-forward.

Many of us need to get our debts under control and your tips make it seem so simple - keep up the good work!

January 6, 2009 at 3:51 AM  
Blogger Komal said...

i really thingk these tips are very useful and sensible.
This way slowly but steadily people will reduce there debt.

September 3, 2009 at 10:31 AM  
Anonymous Debbie said...

Hi,
This is Debbie. I am a financial writer at www.yesdebtfree.co.uk/.
Your site is one of the most visited sites in UK and has a nice user friendly approach. I was thinking if i could write a nice article on " How to select the best debt management company in UK to wipe off debts". I have been doing a lot of research on this topic lately and i hope this would be appropriate if you could post this under the section "Debt" in your site. I can ensure you that this would a high quality article and very original.

I would be obliged to have my article on your site. I do not charge anything for this except for one link back to our site www.yesdebtfree.co.uk/.
This would enhance our web presence and at the same time my article would also help all the debtors in UK to live a debt free life.

October 27, 2009 at 11:23 PM  
Anonymous john said...

Debt settlement is becoming very popular, as an alternative to bankruptcy. But, what about the income tax liability on the forgiven amount?

December 1, 2010 at 1:02 AM  

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