What to Do When You are Close to Drowning in Debt Tide?
Despite campaigns against debt amid the financial crisis, the number of people taking out credit card debt, bad credit loans, and emergency loans is alarmingly rising.
If this continues, the Bank of England says, the inflation rate will further go up, putting more pressure on the finances of people. This will push more people to the verge of debt.
However, amid the rising cost of living, some private lenders are taking the need of people as an opportunity to make money, resulting in reckless loaning practices. Not just small loans, big loans like pound 10,000 bad credit money loans are also high in demand.
If you are drowning in debt, here is what you need to ponder over:
Look out for the way you spend the borrowed amount
Being aware of how you spend your money is the first step to take to avoid falling into debt. Experts suggest reflecting on where you are currently, so you do not blindly keep borrowing money you cannot pay back.
It is basically essential for those who are exposed to debt. If you use borrowed money to pay essentials or overdraft costs, you are more likely prone to financial problems. However, this scenario is commonly prevalent in people who continue to borrow without the settlement of previous debts.
This keeps increasing the debt amount, resulting in a lack of money for your essential expenses. For instance, there is nothing wrong with borrowing money to fund your holiday trip, provided you are able to pay back the loan before you make a plan for your next holiday trip and finance it with a new loan.
As the cost of living is uncontrollable, experts warn against funding inessential things this time.
Avoid the minimum
You have too much debt to pay off that you are unable to clear them once and for all, so paying down the minimum seems to be the best alternative. Although payday loans have been clamped down, unmanageable debts have not gone away.
This is because the form of credit has changed. People have shifted from payday loans to store cards, credit cards, etc. It is likely you find them affordable at the time of swiping, but an unexpected rise in inflation rate by the time payments fall due makes it harder to keep up with them.
Store and credit cards are highly notorious for pushing people on the edge of debt tide because of high-interest rates. It may be between 25% and 30% and can go above if your credit score is poor.
When you have fallen behind in payments, you start paying the minimum. Unfortunately, it takes a long time to settle the debt. A small amount of money drops every month, and the unpaid balance keeps rising due to accrued interest.
Use your card when it is urgent, and make sure that you do not miss the repayment. Try to avoid making the minimum payments, as they do more harm than good.
Using personal contract plans
Another reason for falling into debt is personal contract purchases. This kind of dealership financing has gained popularity in recent years. This seems way cheaper than hiring purchases and personal loans.
You just have to pay a small amount of deposit size and then stick to the monthly payment over the term of the loan. At the end of the term, you can choose between handing the car back and paying for a balloon to own it.
Therefore, more and more people change their cars more frequently than they should. Most of the time, you change your car in three to four years when you finance it with a PCP. However, you would use the car if you were financed with a private loan.
Depreciation happens in the beginning years. Under PCP deals, you miss out on cheap years of driving. If you drive your car for a more extended period, you will end up paying less money than you would pay on a PCP.
Although financial help is there, half of the people seek it when things have already got worse. Experts suggest taking help sooner rather than later. If you have noticed that you are struggling to keep up with payments, you should immediately contact your lender for a solution.
A debt spiral does not build up overnight. It is a gradual process. If you do not nip it into the bud, you will be more stressed, your debt amount will radically spiral up, and soon you will start feeling the pinch.
Do not wait for the due date if you sense that you will fall behind on the payment. Just contact your lender and tell them about your problem. They may put you on another repayment plan or a payment holiday.
A golden rule of thumb says that you should consider making a budget. Budgeting helps you know how much is coming in and how much is going out. It enables you to track your spending. Try to whittle down your discretionary expenses.
Do not stop setting aside money for a rainy day so you do not need to fund unforeseen expenses. Be cautious with your spending as much as possible during the cost crisis. Prioritise mortgages, rent, gas, electricity bills, etc., so you do not miss payments.
The final word
As the cost of living is rising dramatically, you must be very careful about managing your finances. Make sure that you spend on essential expenses and remove discretionary expenses from your budget. Pay your first, so you have some money in your emergency corpus.
If your savings have fallen short and you have some emergency, you can take out doorstep loans with no credit check then. However, again it is crucial to assess your repaying capacity. If you are on the verge of debt, you should contact your lender to seek help.
You can even consult a debt management company. They will likely negotiate with your lenders.
Description: When you are close to debt tide, you should immediately assess your financial situation to determine how you can control it.