This will ensure that you have a stress free life and clear off you debt effectively and not jeopardize your credit score and history. Moreover, it will make your future loan obtaining process easier.
Recommended reading: Ways To Manage Your Money And Avoid Falling In Debt
The Transaction of Borrowing and Lending Money
You may need money for your business or for your personal reasons and the best resource can be a money lender. It can be a bank, any financial organization or lines of credit. There are so many out there ready to help you but if you are not conscientious right from the beginning such beneficial resource may turn out to be a serious point of concern.
When Borrowed Money Can Become A Worry For You And Money Lender?
Having debt is not bad at all but having to worry for its repayment is certainly not asked for. The best way is not to have excessive debts so that you cannot manage it with your available source or sources of income. If you start to worry about your loan repayment it will not only affect your financial health and credit score but will also have serious adverse effects on your behaviour, relationship with others and even shatter your dreams. Therefore, know when it starts to go over your head to minimize the drastic effects.
The times when you need to start worrying include:
- When you have to pay more than 20% of your take home income to pay off your consumer debts
- When you start to make late payments or even have to skip a few payments
- When you do not know the exact money that you owe to your creditor or creditors
- When you are refused of further credit from a money lender, bank or even your friends and colleagues
- When you overdraw your checking amount more than a couple of times in the past one year
- When are happy to pay only the minimum amount due on your debts
- When you are compelled to think that it is best to borrow further to pay off your debt
- When your loan account goes to the collections and you start receiving phone calls from them
- When you start avoiding mails, phone calls, door bells and even avoid social gatherings
- When you use credit cards to pay off the monthly bills
- When you think of utilizing your retirement benefits to pay off your consumer debts and
- When you have to look for extra source of income and have to take up an extra job just to pay of your debts
Is there a solution to the problem?
However, there is no need to panic when you notice any or all of these signs as there are easy and effective ways suggested in sites such as libertylending and others to reduce excessive debts over time. All you need is patience, plan, diligence and endurance to take up a not-so-smooth path.
Also please read: Debt Management and How to Pay Off Your Loans Smartly
Ways to avoid worry about money borrowed and repayment
Get and provide relief
There are a few simple steps in which you can get relief from your debts and at the same time provide your creditor some hope to recover the amount loaned by them fully or partially, sooner or later.
- To start with, do not give up hope when you have too many debts
- Remain positive and make proper plans to get out of debt to repair your credit score
- Consult with expert credit counsellors for help
- Call your creditors up to intimate them about your hardships before you miss out on any payments
Discuss with them about your available options to formulate a favourable repayment terms and make sure all agreements are made in writing.
Things to ask your creditor
There are different ways in which your creditors can help you out in these hard times provided you make the right approach at the right time. Things that you can ask your creditors are:
- Forgive or waive some of your outstanding loan amount
- Divide the remaining amount into simpler and smaller payments
- Suspend a few payments
- Waive any late fees charged and
- Increase the time to repay the debt
You may also approach a non-profit credit counselling service to prepare a reasonable budget and also help in negotiating with your lenders. At this point you must know that you cannot repair your credit history by paying fees to any so-called credit repair company. It is only you who can repair it by repaying your debts.
Opting for debt consolidation
You may also find other useful suggestions at libertylending or others such as debt consolidation. This is a new loan that combines all your existing debts and often has a lower rate of interest, higher amount and a longer period to repay it back to the lender. This is a very useful strategy for debt management but you will need to pay this loan off as well so that you do not damage your credit score.
Therefore, while considering debt consolidation as your easy way out of the debt trap, there are a few factors that you should keep in mind such as:
- You may need to change your spending and purchasing habits
- You will need to reduce credit purchase and leave behind your credit cards when you go out to shop your daily essentials
- You may also have to take out a Home Equity Line Of Creditor HELOC
Also consider the total interest cost of the debt as it may increase if the payments are spread in small amounts over a longer period of time.
Other ways to follow
To clear off your debt you may also talk to your creditor for a debt settlement but make sure you know about the fees charged for it which is often very high.
Bankruptcy is the last option that will damage your credit score but will surely wipe off your debts. However, this is the last thing the creditor wants as they will lose the entire sum owed by you. It is for this reason creditors often agrees for a debt settlement.
Article contributed by: Isabella Rossellini
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- How to Use Credit Cards to Your Advantage
Good books to read on the related topic:
- Manage your Debts (Loans & Credit Cards)
- Financial Planning for Doctors
- How to Get Out of Debt, Stay Out of Debt, and Live Prosperously*: Based on the
- Proven Principles and Techniques of Debtors Anonymous
- You Can be Rich: A Practical Guide to Financial Planning
- Financial Planning for the Newly Married