Are your credit card bills causing you heartache? Are your creditors hounding you for their money, or are you beginning to worry about losing your home and possessions because of your outstanding credit debt? These are the types of problems that many people lie in bed worrying over night-after-night. However, dealing with credit card debt is not as huge an issue as you may assum.
Many people are going through – or will go through – financial turmoil. It's a life crisis that a surprisingly large percentage of the population will face at some point in their lifetime. Typically the financial crunch is due to credit card debts and their high interest rates. More often than not, the root cause comes down to a case of a person spending more than he earns, then fighting to get every last dime to make a dent in payments or simply to make a payment at all. Just because you are in some stage of a financial crisis does not mean that you need to take drastic steps of action.
Here are some tips that should help you deal with your credit card debt:
1. Make a Budget
This is something any person should have in place beginning life outside of school or upon landing that first job. If you do not have one now, then it's time to remedy the problem. It's not too late. A budget is an integral component of your financial health and adherence to it helps to keep you out of debt in the first place.
The first thing that you need to do when putting a budget together is add up how much money you make each month and then make a list of all your expenses as they are currently starting with your "must pays" such as mortgage, electric, groceries , phone, car, loan payments, and other life requirements. Follow that up with a list of all credit cards debts, store charges, spending on friends and family, and current expenses that are not required.
Having done that, you should know how much you make and how much you spend each month. Now look to see where you might be able to pay a bit less so that you can pay more for a higher priority expense. Any excess money you have should go to your bills to pay them off faster.
2. Contact Your Creditors
Avoiding your creditors does not solve a debt problem. Instead, choose to address it directly. If you are having difficulty repaying a debt or making a payment on a given month, then it's more prudent to speak with your creditors openly about the circumstances you are facing. You may be pleasantly surprised at how easy most of them are to work with. Many have their own in-house department and plans specifically to address such issues. At the very least you may be able to buy more time from them to pay without watching your debt grow out of control. The extra time also stops the credit company from going through a collection agency against you. If you talk with them, you might come up with better, more creative payment options too. So give it a chance and do not leave your creditors with the impression that you are trying to run away from your financial obligations to them.
3. Debt Collectors
There are laws in place that protect you. If you are not able to pay your debts on time, there are limits on the means that debt collectors can use to collect money from you. The Fair Debt Protection Act allows a company to file a case against you to collect money; however, if you at least make an attempt to pay, you are protected. For example, if you send $ 5.00 and they cash the check, they can not come after you. Also, your credit report is an important tool under the law. You're allowed to dispute any charges or notifications on your credit report.
4. Credit Counseling
There are professionals who can assist. When you think you are getting into a financial crisis or are fighting to get out of one, then you can consider companies that specialize in improving your payment arrangements. These credit counseling organizations are able to develop plans tailor to your specific financial needs.
Bankruptcy should always be your last ditch option in a financial crisis. Going this route will get all existing debt off your back; however, being eligable for future loans or credit cards will not be an option for you for a good 10 years. It might even sway a potential employer from hiring you, so this option should be weighed with great caution.