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The First Strides To Repaying Debt

Author : Nick Hunt

Debt troubles are causing misery for more and more people, and levels of personal debt are at their highest in history. Many of us want to start paying off our debts, but the job can seem too much to bear. There are, nonetheless a number of effective methods you can utilise to get started on the path to a debt free future,

Firstly, it's essential to look at your spending and rein it in whenever you can. There's not much point in trying to pay down debts with one hand while the other is busy running up new borrowing. Make a commitment to stop using your credit cards except as an easy payment method, always paying back what you've spent when your statement arrives. Also look at cutting down on on your day-by-day spending - buying cheaper brand names, forgoing the occasional treat or social event, it all counts.

But this alone will not do a great deal to clear your debt - you need a programme to pay it down as quickly as possible, and this is where the idea of 'debt snowballing' comes in. Fundamentally, you focus your attention on paying down one debt as fast as possible, putting all your spare cash into this effort while maintaining your other debts at their minimum repayment amounts. Once this first debt has been paid off, add the monthly repayments you'd been making on it to the payments on the next debt in the line. This way, the effectiveness of your money gets greater and greater as it transfers from one debt to the next.

If you're having serious trouble keeping up with your repayments, though, the previous two techniques aren't going to head off financial disaster. It's now that debt consolidation might be a useful option. The underlying idea is to take out a new source of credit, and use it to clear all your existing debts. The idea is that making the repayments on your new single loan will be more affordable than the combined fees, interest and charges of your previous debts, and so more of your cash will go towards clearing what you owe rather than just pouring money down the drain paying the interest.

You really need to take care with this last option though, as you're possibly increasing your debt problems rather than alleviating them. Be certain you have the discipline to clear your old debts and not run them up again before going down this path.

None of these options are simple, and none are without their drawbacks and dangers. However, most of us accept now that debt levels are too high and we need to start doing something to reduce them, whatever the short term pain that might be involved. By taking these suggestions and making use of them, you can make that first stride towards becoming debt free.

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Nicholas writes on various aspects of personal debt, from managing credit card debts to stopping repossession.

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Tags:   debt problems, debt free, personal finance

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Submitted : 2011-03-24    Word Count : 507    Times Viewed: 396