Debt is a huge part of our economy. Across the world, governments rely on debt to pay for services, banks rely on debt to make money and consumers rely on debt to buy necessary items such as houses and cars.
It is a global cycle, a game of buying and selling debt create money. And as with any games there are winners and losers. On a large scale, successful banks are generally the winners, but on a smaller scale you can be either a winner or loser with your own personal debt.
Running up debts that you can not afford and having repayments each month that you can not keep up with is obviously a bad idea from the point of view of your budget. It reduces the amount of spare cash you have each month and it also costs you money because you will have additional charges added on for late bills or for going over your overdraft.
This traps you into a cycle where you are paying out a lot each month to lenders at a time when you are probably struggling to reduce your outgoings and balance your budget. You get further and further into debt and reduce your credit score further in the process, limiting your options to get credit in the future.
Winners are the people with good or excellent credit histories, who get easy acceptance for loans, credit cards and mortgages, and benefit from the lowest interest rates and APRs available. This is generally because theyve handled their finances and debt well in the past, so lenders trust them.
Becoming a winner
If you have a less than impressive history when it comes to making repayments on your debt, you might think that you are stuck in the cycle of bad debt. However it is possible to turn things around and improve your credit.
1. Get a copy of your credit report so that you understand what is on there and what lenders judge you on. A company like Cashlendupfast will be able to provide it.
2. Correct any outdated information.
3. Make sure all your address information is up to date with current lenders. You need all your bills pointing to your current address to make you easier to trace and look more organised.
4. Register to vote, as it makes you look responsible and easier to trace.
5. Write down all your debts, and include the interest rate, length of time youve had the debt and the monthly repayment cost. Add up the total cost.
6. If the total cost is more than you earn or than you have left after living expenses, you need to speak to your lenders. Show them your income and outgoings and budget and ask to negotiate a new payment plan with lower monthly payments. Start with the ones you spend most on each month and work down the list until your bills become more manageable.
7. If you have spare cash each month, prioritise paying extra amounts on the most crucial debt. This might be one with a very high interest rate, one that is in arrears or one that youve had for years. If you can close off a debt completely this will show as a positive on your credit report.
8. Cut out all unnecessary spending and redirect all extra money to pay off debts. This might seem difficult and not very fun, but it will only be for a few months until you have made your debts more manageable and got yourself up to date.