Before doing anything drastic like filing for bankruptcy, you need to assess your debt situation. It may not be as bad as you think. Below are some suggestions for managing your debt.
1. Determine how much you owe. Take into account all of your debts and consider how much, if any, is past due, how much is owed now, and how much is owed in the future.
2. Create a monthly budget that allows you to at least make the minimum payments on all of your loans. Be prepared to let go of some of the extras for now so you can get your debt under control. Think of some creative ways to make some extra money. Consider doing some private tutoring, selling some of your stuff, or developing a hobby into a small business opportunity. Whatever you do, don’t give up!
3. Focus on paying off the bills with the highest interest rates first. If you are absolutely unable to pay all of your bills, make sure to pay the most important ones such as your water and electricity bills. You don’t want your water or electricity to be shut off.
4. Attempt to work out an alternate payment plan with your creditors rather than waiting for them to contact you. This doesn’t always work but it’s worth a try. Sometimes they will waive your late fees. It’s always better to keep creditors informed of your situation rather than trying to avoid them. They will appreciate that you are trying your best.
5. Be wary of consolidation loans. Consolidation loans are becoming increasingly popular, especially now with the economy in such turmoil. Although these loans allow you to make only one monthly payment instead of having to make several, you need to be careful because by having a consolidation loan you have freed up your credit cards. You don’t want to go even deeper into debt just because you have credit available to you. Another reason to be wary of consolidation loans is that it may take you a lot longer to pay off your loan because the monthly payments are often low, encouraging you to pay it off slowly. Although consolidation loans do work well for some people, they are definitely not for everyone.
6. Ideally, you want to try to solve your debt problems on your own. If you are unable to do so, however, you can have a credit counselor create a debt management plan for you. The counselor will then make arrangements with your creditors on your behalf, acting as a middleman.
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