A Reality Check For Getting Out Of Debt

It is just human nature to act on impulse before thought.   In economic terms, we like to buy now, pay later. The character quality of patience is overwhelmed by the thought of deferred payment available by using the convenience of credit cards, loans and mortgages. We easily make the assumption that you we can afford to make the payments – including principal and interest on a debt – because of our present ability to earn an income.

We should realize, however, that as reality teaches, theory is not the same as practice.  Circumstances are always changing. Unforeseen market changes, loss of a job, injury, or illness can quickly change our ability to pay our debt.

There are other factors that can contribute to our inability to manageable debt.  They include such things as not knowing how to budget, failure to stick to a budget, binge spending, shopaholic type behavior, needing to buy special offers, being enthralled by big discounts, or overwhelming desire for new stuff like tech toys, clothes, games, etc.

If you are to get out of debt fast, you must recognize the fact that change happens, both planned change and unplanned change. You will have to learn to adjust your spending up or down according to your circumstance. The sooner you can recognize change and make adjustments, the easier it will become to manage and ultimately to eliminate your debt.

Short term adjustments you may have to make include paying off your debts one by one, in an orderly and timely manner (see info on debt snowball method). If you will act quickly to inform your creditors when there is a problem, it will be easier to negotiate adjustments in your payments.  That may in turn lead to reduced rates, waived fees or late charges, etc.

A popular way to get back on track financially is to consolidate your debts into one loan that can be payed off with lower monthly installments. There are many different ways to consolidate debt. A very important step in this process is to shop for the best terms and lowest interest rate available. The terms for consolidation loans are usually connected to your collateral or what assets you have to secure your loan principal. It is surprising that terms of collateral vary even more than interest rates!

The best case scenario is to find a consolidation loan that will give you enough money to cover all your debt at a rate that you can afford to pay and with terms that are flexible enough for future up or down adjustments in payment. In some cases this may be as simple as getting a line of credit or extending one enough to get back on track. (See What’s Good and What’s Bad About Loan Consolidation)

Bankruptcy is the worst case scenario because you it will cause you to lose your credit worthiness and it will take years for you to rebuild your credit. There are few opportunities for credit after bankruptcy, and they usually are undesirable.  They tend to lock you into a rut of debt payments that can multiply the years and increase the cost to become debt free.  Another article to consider is “What is the Process of Bankruptcy”.

There are are solutions between the best and worst scenarios, however.  Solutions that can help you get rid of your debt and relieve stress while avoiding bankruptcy.  They can create opportunity to control what’s left of your life.

Remember, “No pain, No gain!”  These things may sound easy to do, but significant effort will be required to get the process of debt management under control.

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