Debt is uncomfortable for most people. But everyone can get into financial difficulties, be it through their own fault or through unfortunate living conditions. Unfortunately, many people ignore the situation at first. It is important to be active right now, because if you want to reduce debts, you have to be careful. This includes dealing with creditors, drawing up a debt plan and examining financing alternatives . If you want to permanently reduce your debts, the following guide can be a first aid. See http://aaronsonlawfirm.com/personal-loans-debt-consolidation/
Get clarity about your situation
A first important step to reduce debt is to get a good overview of your own situation. Overindebtedness rarely arises from a single loan. The problem is usually a confusing collection of several demands. It is therefore advisable to keep a budget book so that you always have an overview of your income and expenses. So first find your documents together and create an overview:
- Where do you owe?
- How high are the respective demands?
- How urgently do you have to react to individual payment requests (deadlines)?
- What is the total debt?
Compare this with your available financial resources to see how you can reduce the debt:
- What are your regular income and expenses?
- Is there room for additional savings or income?
- How much money do you have for monthly payments?
- Is it currently possible to meet all requirements?
Clarify the situation with your creditors
After this first important step has been taken, action can be taken. First of all, you should make very urgent demands and contact the creditors. Otherwise, they could quickly hire a debt collection agency, which could result in additional costs. Then debt reduction becomes even more difficult. A negative Schufa entry also threatens and can make your life unnecessarily difficult in the future.
Try to compromise with the creditors. Perhaps a temporary deferral, installment payment or, if it already exists, payment of lower installments is possible.
If it is unlikely that you will be able to meet the claims in the foreseeable future and personal bankruptcy may even threaten, it may make sense to propose a comparison to the creditors. This means that you agree on a partial payment with the creditors and a certain part of your debt will be canceled. Creditors are often quite willing to negotiate here, as they still receive at least part of the outstanding amount.
Create a debt plan and reduce debts
After you have clarified the situation with your creditors, plan to pay off the debts by creating a debt plan to reduce debt. Make a list of your creditors’ claims and deadlines and distribute the money available to the claims. Whenever you have some money left, you should use it to pay off the smallest claim faster. In this way, the situation becomes clearer and easier to use over time.
It is tedious and takes time, but in most cases the debt can be reduced. Try to live as sparingly as possible and avoid unnecessary expenses. You may also have the option to do a few hours of overtime or take a part-time job to improve your earnings. All of this can help to relax the situation and get out of the debt trap faster.
Consider debt restructuring to reduce debt
In some cases, it can make sense to take out a debt rescheduling, ie take out a loan, to pay other debts. This can make sense above all if there are many smaller claims, perhaps even with high interest rates. Some arithmetic and weighing are necessary here. Perhaps you pay so much interest on the various claims that they would get away better with a cheap debt rescheduling loan?
Another major advantage is the better clarity. Debt reduction is often easier and also less psychologically stressful if only one loan has to be serviced and not a confusing jungle of many smaller claims.