For Gold, Peace, and Freedom


Getting Out of Debt

June 23rd, 2009

get-out-of-debt.jpgIf you are in debt, it is easy to feel overwhelmed. Knowing where to turn for help and support can be difficult, but there are steps that you can take to tackle your problems and ultimately get out of your current situation. This will be a long term process and there are no overnight miracles, especially if your debts are large.

Face Up To Your Problems

This is the first step in the process of eliminating your debts. You need to sit down and acknowledge how much you owe before you can begin to tackle the problem effectively. This often involves visiting websites to get advice.

Work Out Your Budget

You need to make an accurate assessment of your financial situation. This involves calculating the full extent of your outgoings — even the purchases that you regard as insignificant. As you are in debt, your outgoings will almost certainly exceed your income. This is a good opportunity to see if there are any areas in which you could cut back to reduce your expenses. Even cutting out unnecessary expenditure such as takeaway coffee and lunch can make a difference. To get out of debt quickly, you need to save as much of your income as you possibly can. To make this easier, it is often useful to draw up a budget to highlight essential expenditure such as household bills or rent.

Can You Increase Your Income?

As well as reducing your outgoings, look for ways to increase your income. If your household income falls below a certain limit, you may be eligible for benefits to help make ends meet. This is worth looking into even if you are not eligible. Alternatively, you may want to look for part-time work that you can fit around your current job to increase your earnings. For most people, this will be the most realistic option. Some of the possibilities include weekend work in a shop, working evenings in a pub or bar, or baby-sitting during the evenings. Increasing your income means that there will be more money available to pay off your debts more quickly.


Prioritize your debts in order of importance. Ideally, there will be some money left over to pay off your debts after your basic living expenses have been accounted for. Although all of your debts are important, some will have more serious consequences than others. For example, if you do not pay your rent, mortgage, or household bills, you could find yourself being evicted or cut off. Work out which of your debts is the most significant and make an effort to pay those off first. If there is any money left over each month after this, use it to pay your other debts. Even if you cannot afford to pay the full debt, making a repayment contribution each month shows that you are committed to improving your situation. Creditors will often be more open to negotiation regarding your repayments if they can see that you are trying. Of course, this will not always be the case though and they are not obliged to give you any breathing space if you have already failed to meet minimum payments or pay off debts within a certain time frame.

Contact Creditors

If you have multiple debts, it is likely that you will not have much spare money to put towards the debts that are not at the top of your priority list. If this is the case, you need to contact your creditors to negotiate payments. It may be possible to spread your monthly payments in a long term repayment plan. This will take longer to pay back but it is more manageable, particularly if your debts are large or you owe money to lots of different creditors.

Write to each of your creditors and express your commitment to paying off your debts. At the same time, you also need to explain that your financial situation is less than healthy, and that you are having problems paying your debts. When entering into negotiations, do not offer all or most of your income to any one creditor. Even if the creditor in question relates to one of your priority debts, it will leave you with little or nothing to pay towards other debts. Creditors will often try to convince you to do this and it is easy to feel that you must agree. It is vital to get confirmation of any agreements in writing so that there is evidence if a creditor tries to argue that the agreement(s) never took place. If you have a verbal agreement over the telephone, it is a good idea to send an email confirming the agreement to make sure that there can be no misunderstandings further down the line.

Long Term Repayment Plans

Paying off your debts is likely to be a process that takes months or even years. With this in mind, you need to create a long term repayment plan to help you keep track. It can be a good idea to take out a loan to pay off your debts in one clean sweep. This means that you can make one single payment towards the loan repayment on a monthly basis, which avoids the need to juggle multiple repayments to different creditors.

If things get out of hand, there are other options. For example, you can pay a debt management company to consolidate your debts together and organise payments to your creditors. This can be quite pricey and is usually more of a last resort.

Sally is a freelance writer from the UK who has written articles on a wide range of subjects. She is available for private requests through Constant Content.

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