Month: January 2012

Credit and Debt Management Go Hand in Glove

Managing credit debt is as a hand goes into a glove. Nothing else will do when it comes to a good credit rating but to also be a good debt manager.

hand in glove money

money in gloved hand

If you as debtor can’t manage to do this then the chances are very high that you may not have a good credit rating for too much longer.

In the recent past, credit has been too easy to access for many people who weren’t in a good financial position in the first place to be loaded up with debts that they had no way to pay off. The provision of this credit is now linked to irresponsible lending providers who had more of an eye to their bonuses than they showed towards their clients. Consequently, the global financial system came close to collapse all around the world.

Ultimately though, we are all responsible for ourselves and if we were already struggling financially, then we all should have taken the hard road and not tried to buy our way out of debt.

But then again, hindsight always knows better as to what should have been done instead of what we actually did.

Once a financial institution has extended a line of credit to you for whatever purpose; that is a debt that must be paid.

If money is short and you are having difficulty paying off a credit card debt or a store card debt, then the best idea is to make an opportunity to see a finance officer either at a bank for a lower interest rate loan or at the financial institution you owe the money to, to arrange for a repayment schedule if possible.

Not all financial institutions will agree to this so you will need to show an honest intent. Once they can see that you are really battling to pay off your loans, many of them will decide a little bit of something regularly is better than a whole lot of nothing ever.

However, if the credit has been extended to you or your business as a secured loan, it could be a quite different matter and the financial institution may decide to send you into bankruptcy so they can recover their loan faster.  There are always variables and one of the unknowns to a petitioner for loan leniency is the fact that you won’t know the financial institutions own financial position.

Finances in the world today are set up like a string of dominoes. Once the first one falls over, the rest follow in turn. This is one of the biggest reasons why the world we live in today must have a more regulated world financial system.

In the meantime, as a debtor to a financial institution somewhere, your good management of your own finances will go a long way towards keeping you from becoming just another statistic.

How to Pay off Debt

Knowing how to pay off debt will be essential financial knowledge to have or to learn for anyone or any business who find that their debt to income gap is closing and the repayments are getting harder and harder to make each month.

This tends to be a creeping gap that closes quicker than many debtors are aware until the monthly payments need to be made and they then find they don’t have the ability to make a payment. That signal / scenario is the warning bell to make some substantial changes to their financial management system because it has now become a critical situation.

The way to pay off credit debt is to be knowledgeable about every outstanding debt that is owed to the credit card companies, any and all financial institutions, store credit cards, bank loans and overdrafts, mortgage repayments, contracts for garden care and every other financial commitment that you are responsible for.  And don’t forget to include the essential running costs of utilities like gas and electricity, telephone and transport costs.

Once you have this list compiled and have picked your jaw up off the floor, you will then be in a better position to make a financial plan towards rectifying the problem. And it won’t be easy but it is essential if you are to maintain a credit score and not find yourself listed with credit agencies as a bad debtor.

Once you have made up your mind to stay off the credit agencies bad debtors list then this needs to become your driving force towards your goal of bringing all your monthly payments back into a more manageable repayment zone.

How soon can you pay off your debts will depend on how severe you are prepared to be with budget cuts because you will have to make quite a few. Set yourself a monetary figure and a time frame and this will help you to stay on track. Sit down with every stake holder and explain to them as to the real financial situation so they know where they stand and the part they will need to play. Teenage kids once brought into the family financial loop can be responsible and very helpful even if it is just knowing not to nag for a new computer or play station! Every little bit helps.

Once every stake holder knows what is involved and how to pay off debt it will be a good lesson to everyone involved so that hopefully it will never have to be done again in so drastic a manner.