How To Stop the Debt Spiral
1. Don’t panic!
This may seem blatantly obvious, but many people can’t even begin to plan their route out of debt because they are too consumed with panic over the situation. Take a deep, calming breath and remind yourself that you WILL find a solution.
2. Take inventory of your debts
When debts start to pile up, it is pretty easy to lose track of how much money you owe to whom. Create a detailed list of all your debts including who you owe, how much you have paid to date, how much you still owe, how often payments need to be made, and what the penalties are for missing payments. This list will give you clarity on your debt and overall financial situation and will guide your subsequent debt management decisions.
3. Make cuts wherever you can
Now is not the time to make unnecessary purchases. You should determine if there are any expenses that you can cut until your debts are paid off. These might include expensive or luxury products, entertainment expenses, and meals at restaurants. It may be difficult to deprive yourself of these things, but you will be able to enjoy them again once you are free from debt.
4. Investigate all your options
Debt consolidation means you will take out one loan that is sufficient to pay for all of your various debts. The benefit is that you will then only have one loan payment to make per month as opposed to a slew of payments. You might be able to get a better interest rate as well which will save you money. Just remember not to run your accounts back up again because you have extra money.
There are also many debt settlement and reduction programs available to you.
If there are certain payments that you simply cannot make and for some reason you aren’t eligible for loans, you might want to ask family and friends for assistance. It may not be an ideal solution, but it will buy you some time to investigate other options.
Speak with lenders
If you aren’t going to be able to make a scheduled payment, you should absolutely arrange to speak with the lenders. Many lenders have programs designed specifically for borrowers who are in the midst of “financial crisis” and require additional time to make their payments. In addition, you should always prioritize large bills over smaller ones because failure to pay the large bills will incur more serious fees and will be more damaging to your credit.
This should only be considered if you have thoroughly explored all other available debt management options. Declaring bankruptcy may require you to sell off property or assets. It is NOT an easy way to escape debt.
The road out of debt is a challenging path, but as long as you keep a level head and investigate all options you should be able to emerge debt-free.