However, when your income isn’t enough to keep up with repayments, it’s time to address how to deal with the situation. We’ll look at three debt scenarios and three possible debt solutions here – or for more help and advice with debts, you could follow the link.

Scenario one:

You have more than one debt to repay, you can comfortably afford to make the repayments and you have a secure income, but you’re finding managing multiple debts a hassle.

Possible debt solution:

A debt consolidation loan could be the solution you need. By replacing all your debts with one loan, you could reduce your monthly payments and find managing your finances simpler. There is the potential to lower your monthly payments if you spread the loan over a longer term, but this could cost you more in interest overall, so bear that in mind.

Scenario two:

You have multiple unsecured debts and you’re finding it difficult to keep up with the repayments, as well as keeping a roof over your head and putting food on the table. If you could just freeze the interest and charges on your debts and pay a little less every month, you’re confident you could manage your repayments.

Possible debt solution:

Debt management could be the answer you’re looking for here. Debt management involves making a new repayment arrangement with your creditors – asking them to freeze your interest and charges, and/or accept lower repayments over a longer period.

Some important things to consider are that debt management would be noted on your credit file for six years – and your creditors wouldn’t have to agree to reduce your payments. Even so, a debt management company could assist you and it could be a solution to your debt problems.

Scenario three:

Your debts seem insurmountable and you have no idea how you could ever repay them.

Possible debt solution:

Insolvency may be required in these circumstances, as it can actually write off debt you can’t afford to repay. Your options might include an IVA (Individual Voluntary Arrangement), bankruptcy, or a Debt Relief Order (DRO).

Insolvency would have a serious impact on your life and could involve surrendering equity in your home or valuable possessions. It would have a serious effect on your chances of obtaining credit in the future.

First, find out how much you’re bringing in.
How much is your paycheck? If any odd jobs that you do can be counted on, put these numbers down as well. Write these numbers down on one side of a piece of paper.

Second, assess your debt.
Using the other half of the paper, write down everything that you spend money on. How much was that tank of gas? How much is the cable? How much does the daily paper cost you? This is not the time for judging the items that you’ve bought. If you don’t have exact figures, estimate.

Compare your total income with your expenditures. Is there still money left in the account after all of the necessities are paid? Here is where the hard questions are asked. Can you live without cable? Can you carpool with someone in the neighborhood and split the gas costs? Only you can make these decisions.

Cutting back on spending is hard to do but it can be done with a debt management plan. You’ll have more money to spend on luxuries with a great debt management plan in place.