Take responsibility for your debt with these helpful tips

Christmas is probably the most expensive time of the year, as it encourages a considerable amount of spending. The rituals of splurging on expensive gifts, buying household items, excessive partying, and drinking and feasting all come with a high price tag. 

Adding to the problem is the Boxing Day sales when most people tend to go on a shopping spree for the most expensive appliances based on the notion they will save a couple hundred dollars. Unfortunately, people often use credit cards as a source of funding during this period.

So, now that Christmas and New Year’s is gone and the debt is waiting to be repaid, the minimum payment on the next statement will be higher plus all the other usual bills to pay. How do you cope? What should you do?

If you are in a financial crunch, be proactive. Don’t ever ignore or avoid your creditors, thinking that they will get tired and forget about the debt or write it off. That thinking will only escalate the problem and lead to more drastic actions by creditors, much more quickly.

Be responsible and take the initiative to contact the creditor to talk about your debt and try to make an acceptable payment arrangement. Ask about hardship programs. Some financial institutions have this in place to help customers get over a bump and get back on track. Be honest and transparent about your finances. If they ask about your finances, it’s because they are trying to assess your financial situation to see how best they can help. 

Make realistic payment arrangements, rather than agreeing to pay an unfeasible amount. Agreeing to an amount you can’t actually pay will lead to broken promises and you should strive to avoid that at all costs. It breaks the trust and it undermines your credibility. Too many broken promises and avoidance tactics will most likely lead to a lawsuit against you.

Consolidate debts to make one payment instead of making several payments to multiple creditors. This option will also help you to save on interest. Usually, the monthly payments on one credit facility will be less than the amount that you would pay toward many different credit cards or loans.

Some companies also offer a lower interest rate after a period of time, so seek out those opportunities. You can switch cards to lower interest cards. Also, ask for cards without annual fees. Consider whether or not you need to have several reward cards. These cards have a higher interest rate and high annual fees. It may be better to have one card that gives travel benefits rather than having many different ones.

These simple adjustments can increase your cash flow.

It is not a good practice to have too much of your income going toward debt repayment because you can easily become bankrupt if your income is reduced or if you have no wages due to job loss. If you are in a position to propose a settlement, you could potentially save a lot by making that one lump sum payment to get rid of the debt. 

Don’t neglect your finances until it’s too late. Take the initiative and try to find a solution that will work best for you.



Featured Image: It’s easy to go into debt during the holidays. | Pixabay