Getting a Debt Do Over

Debt has a tricky way of sneaking up on people as its development in the form of easy credit is planned out and delivered in such an inviting manner. Regardless of income or background, there are easy funding opportunities everywhere and for just about anyone. Payday loans, general personal loans, store and credit cards, vehicle financing, home loans and loads of others. Lenders are always looking for ways to provide credit while managing the risk.

For the unsuspecting consumer who may not have a strong grasp on the fundamentals of money management, this is a time bomb waiting to happen. Especially in a society where prestige and importance is loosely based on what a person has. This materialistic and keeping of with the Jones’s mentality creates a ridiculous environment where credit thrives.

The key to breaking out of this toxic cycle of purchasing on credit and plunging deeper into debt is education. Learning how to manage money is essential in getting out of debt and staying out of debt. Surprising enough, there are free money management courses put on via free financial counsellors in addition to low cost courses at local community colleges or Tafes. Many non-profits may also provide assistance in this area. The core lessons will generally involve budgeting and understanding how interest and debt works.

 
If you are already in serious debt a combination of education, creating a plan and possible third party assistance may be needed. Depending on the seriousness of debt and your own personal circumstances, one or a combination of the below debt solutions can be used. The options listed are essentially a borrower’s chance of a debt do over, but without a proper plan and understanding of finances, one can easily fall back into debt.

Debt Consolidation – This may be one of the most popular forms of trying to manage debt. It’s essentially wrapping up all debts into one. The benefits include a possible lower interest rate which reduces the overall amount of interest paid and a possible reduction in your monthly repayment. It also provides the ability to pay down the debt quicker if you include the savings from the reduced payments into the new lower payment. Some of the most popular forms of debt consolidation include; credit card balance transfer, personal loans from a lender or family member, debt agreement/debt settlement.

Refinance – For home and/or vehicle owners who have equity in their assets, they may use that to pay off their debt. This is also a popular method of debt consolidation. However, if a person does not fix their bad financial habits they can easily plunge right back into debt and be worse off as they have chewed up all their equity.

Bankruptcy – This is primarily the last step in trying to get back on your feet. While it may have a bad stigma associated with it, sometimes things happen and this may be the best solution. One should not be afraid of bankruptcy as unexpected circumstances happen (loss of job, accident, divorce, etc) and this may be the option needed to get you back on your feet.

Sell items to pay off debt – This is another great option in getting out of debt and controlling finances. It’s one of the better methods as you are not taking out a new loan or restructuring your debt. With this option you are actually paying off the debt.

There are many other forms of debt management and please share them in the comments section. Debt and the lack of money management skills around the world are big issues. Acknowledging the problem and looking for solutions is the best things a person can do to get in control of their finances and stay there.