How To Recover From Your Debt
Debt is a peculiar thing; most people have it, but people still feel shame to talk about it. The emotional toll is overwhelming to the carriers of debt and accounts in collections. For many, there is no day, hour, minute, or second that brings relief. Constantly checking bank accounts and juggling credit card balances makes the debtor stress and can even lead to health complications.
If you find that you are in the debt spiral, getting dizzier by the day, you must find a way out of the funnel. Thankfully, there are ways to re-establish your financial safety net, but you must know where you stand before making any changes. Because any change without a thorough understanding is not sustainable.
Understand Your Current Financial Picture
People automatically think that looking over their bank account is the best way to understand their financial position, but that is not always the case. Depending on how long you have robbed Peter to pay Paul, your bank account may be a mess of overdraft and stress eating charges. Instead of looking at your bank account, check your credit report, and start fresh.
Take out a blank notebook or open a spreadsheet. Make a list of all your expenses and income. Forget about how much you are behind. Right now, you only want to focus on the total you owe and payment dates.
When looking over your expenses, do you see anything you can eliminate? Often people have multiple subscriptions to streaming services. Can you cancel anything like this? Find simple cuts you can make to save a little money. If, after making these cuts, you realize you still do not have enough money coming in to cover your expenses, then it is time to consider other steps.
Start Making On-Time Payments and Consider Debt Consolidation
Before considering your other options, it is a good idea to start making on-time payments to all open accounts. Hold off on paying anything to collections for the moment. Making on-time payments can help boost your credit score enough to qualify for other options, like debt consolidation.
If your credit score is OK and you have enough income to support a bank loan payment, you might want to look for a consolidation loan. These loans will help you pay off all your outstanding debt and combine all of it under one interest rate, potentially saving you money.
If you cannot qualify for a debt consolidation loan, you can look into filing bankruptcy. There are many types of bankruptcy, and you will need to talk with a lawyer to understand each's intricacies. A bankruptcy will linger on your credit report for a while, but it will give you a clean slate, allowing you to rebuild.
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Start Rebuilding Your Credit
After getting a handle on your debts, whether through consolidation, bankruptcy, or budgeting, you can focus your energy on rebuilding your credit. Be careful about how you choose to re-establish a positive history. While credit cards are fantastic credit tools, it is easy to abuse cards, winding up in the same position you just got out of. You might want to talk with a financial planner or adviser to learn the essential budgeting and spending skills to avoid debt in the future.
Debt is nothing to be ashamed of, and it is something most of the population deals with daily. If you are ready to tackle your financial obligations, congratulations. If you still need time to consider your options, look into consolidation and bankruptcy. If you have any other tips, leave a comment below.