How to Clear Debts
It is easier to borrow money, but once you are surrounded by creditors and want to clear debts, it is always a complicated task. Debt usually mounts up high and fast since most times people forget to take into account high interest rate that has to be paid along with principle amount of a loan. While opting for more and more loans, borrowers forget to check the type and rate of interest on the borrowed amount and then their loans pile up into a huge mountain of debts.
Here are some easy tips to clear debt –
– Improved management of finances: This is one of the best means of getting rid from debts. It requires you to follow smart and simple money management tactics. Keep a record of all small and big payments and other cash outflows, so that you can control any uncalled for expense. Maintain a file of financial documents like bills, statements and payment slips etc, so that you can keep a track of all the financial transactions. Chart out a monthly expense budget and strictly follow it. If you still cannot manage to clear debt, then you should consider debt consolidation plan to make a single payment of all your credit cards and other unsecured debts.
– Debt Management Programs: A debt management plan is an attempt to negotiate payments with the creditors. You can write to you creditors to reconsider you monthly payments or to freeze a lower rate of interest in order to reduce your debt payment. You can also hire a debt management company to do it on your behalf. If not in entirety, the creditors might settle down for a lower interest rate for a certain period. This will give you some time to manage your finances and thereby clear debts. Since this type of arrangement is not legally binding, creditors can withdraw it at their own will. But debt-planning agents can be able to negotiate debt management program with your creditors two times a year.
– Individual Voluntary Arrangement: The Individual Voluntary Arrangement or IVA is a legal agreement, unlike the debt management plan. The agreement has a tenure of few years. The customers have the options of paying low instalments and also write off a part of the debt. The clauses of the agreement are fixed. The interest on the loans is not charged for the time period of the Individual Voluntary Arrangement. The customers get to retain their collateral mortgage property. This is helpful to person seeking to clear debts. The fee charged for Individual Voluntary Arrangement is quite high, which discourages customers from opting for this alternative. Still it is better than facing bankruptcy.
– Filing Bankruptcy: Filing bankruptcy is the last and least preferred option to clear debt. Here most of your debt is written off and you are declared a bankrupt and creditors can no longer harass you for money due. You are allowed to keep only essential assets for yourself. You can get rid of the bankruptcy title, which can happen only a year later.
These are some of the ways to clear debts. The customers who are looking to get rid of debts and avoid any kind of problems regarding the same can try out for good results.
Filed under: Management