by P Reddy

Created on: August 25, 2010

The first thing that you need to do when you are assessing how serious your debt problems is - is to make a list of all the debt you have.  Once you have done this you need to list down your income and how much the monthly repayment for each debt it.  When you have this information you will be able to discover the magnitude of your debt problems.

If your monthly debt repayments are more than your income then your have a serious problem.  What tends to happen to people in this situation is that they borrow from other sources in order to make their monthly payments.  This leaves them in either the same situation or worse off than when they started.  If the debt amounts keep increasing over the years these people will quickly be on their way to being insolvent.

The best way to get yourself into a better financial situation is to take action as soon as you know that you have or may have a problem repaying your debts in the future.  Luckily there are a few things that you can do to get yourself out of this situation.

The first option you have is to get a debt consolidation loan.  The best way to approach this is to add up your month repayments on every one of your debts and then call the bank or a finance company.  Ask them what the monthly repayment will be on the total amount of all your debt.  In most cases it will be cheaper as one loan with the same interest rate will be a better situation than a dozen small loans with different interest rates.

If this is a good option for you - take it.  This will free up your cash so that you have more money every month and you will be paying less in interest charges.

If your financial situation is very bad a lender will not offer you the option of a debt consolidation loan.  This means that you will either have to keep paying off your loans as you are doing now or declare bankruptcy.  If you continue paying your debts try to clear some up by paying extra on the loan.  If you do not have the funds to do this you will need to think about how you can increase your income.

Bankruptcy is a very serious decision and will stay with you for a long time.  Think carefully before you choose to go in this route.  It may be wise to consult a budget advisor beforehand.  This decision will not only affect your credit but also your ability to rent a home and get certain jobs.

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