I have put this guide together primarily because I am currently getting a lot of inquiries from people who are feeling the pinch from the credit crunch and they are asking for ways to get through it with the minimum of long term consequences. Now please understand that this is not a quick fix and it does take a lot of hard work and a great deal of sacrifice but if you are prepared for both then this will help. Remember we are a nation of borrowers and not savers and it is for this reason alone that we all find ourselves in this position.
First of all, without casting any aspersions on any particular person it has to be said, that getting your particular financial situation sorted, may be a little like being an alcoholic in so much as the first step is admitting you have a problem. The reason for this is if you can’t admit you have a problem you will not be able to properly implement the solution. Before you do anything detailed in this article you have to change the way that you spend. You have to stop spending money other than what you have to spend to survive and meet your obligations for borrowings. It is worth it because once you have come out of this you will be a far better person and you will appreciate money and the things it can do for you far more.
Most people are feeling the credit crunch badly because over the past few years they have spent too much and most of the money that they have spent has come from borrowings. Now in a normal market this kind of practice can be OK. However in this market it is totally unacceptable because borrowing is very tight and if you are able to borrow at all it will be at higher market rates than you would have normally been used to.
So the very first thing you should do is make what is known as an income and expenditure sheet. This will detail all your income such as income from employment any tax benefits and allowances. In addition all your outgoings such as mortgages loans HP and credit card payments fuel costs such as electricity gas, and also food and other expenditure. Things that should be detailed on this list are things you have to pay and not things you don’t have to pay such as going on holiday etc. If you follow this plan you will be able to reap the benefits soon enough and mark my words you will appreciate them far more if you do wait as you will be able to fund them without having to resort to debt to cover them.
The next step is to try and reduce some of those outgoings, for example you can look for a remortgage to reduce your mortgage payments. Whilst I would never recommend it, you can always consider changing a repayment mortgage over to interest only until you get yourself back on your feet at which point you can reschedule the payments back to repayment. Better to be able to meet all your outgoings and only pay interest on your mortgage than struggle with a repayment mortgage and start falling behind with other things. The consequence of this is you may not be able to get further borrowings if you start to fall behind with anything at this stage.
You can also look for cheaper credit cards, a lot of credit card companies have put up their interest rates recently. However they are still offering reduced rates for good quality new customers. With that in mind don’t stick with your provider if they have decided to rip you off you should have no loyalty there.
You can also consider if the need is great consolidating all your loans onto your mortgage or a secured loan. Now this is never good advice, because consolidating loans and credit cards onto any long term debt will always cost you more as you will be paying for that debt over a longer term. That said it may be your only option to reduce your outgoings to a more affordable level, but I would only consider it if it is the last resort and failure to do it would result in you falling behind, but to reiterate whilst it may be a lot cheaper each month, you will be paying more for your credit over the long term so take this option only if you have to.
Have a look at your utility bills see if there is something you can do to reduce them. Obviously using less power or turn the heating down is always a good start but also get online to see if there is a cheaper supplier for you. This sort of practice can be used for virtually anything and everything you buy so get on the internet and see if you can save some money by just changing who you deal with.
I understand there may be some people out there who have gone beyond the advice I have detailed so far and now I will get to you and what you can do. First of all most peoples biggest problem when they are in a bad situation as far as their finances go is a complete over commitment to debt. I agree that over recent months everything has become more expensive but that said most people would be OK if it wasn’t for the debt that they have be it credit card debt car loans HP or mortgages, it has all just become too much I for one recognise that.
The most important thing that you can do when in this situation and normally, it is the last thing anyone actually does, is get in touch with your lenders. That means all of them credit card companies, finance companies and even your mortgage company. One of the biggest issues I have to deal with when helping clients out of situations such as this is the complete lack of contact the lender has had with the client. It is all well and good me speaking to the lenders on the clients behalf but if that is the first call they have had at the end of a long time trying to recover the debt then it rarely goes well.
So start by get all your statements together along with your income and expenditure and get in touch with the lender. Make sure that all your facts are straight be prepared and you should get the result you want. In addition be realistic, if you are supposed to pay the lender 300 per month don’t think you will get away with 10 pm . Whatever you do decide to pay them make sure it is a fair distribution between all the lenders of your disposal income, failure to do this will result in them not accepting your proposal, in addition be prepared to tell them what you are paying other lenders so they understand that you are not short changing them.
You will need to explain to them why you are in the situation you are in, above all you will need to make an agreement to pay them something and that is best done from the basis of some sort of calculation, for example get your income and expenditure worked out, tell them what you can afford to give them and why. In addition try and give them some light at the end of the tunnel in so much as a proposal, once you have cleared one of your other debts you can start paying them more. You will find that this approach will make most lenders far more receptive to any deal you offer them. Remember all a lender wants is the prospect of a full repayment and if you can give them the assurance that this is going to happen in time, they will invariably work with you.
So to summarise, you need to change your spending habits, cut your costs down to the bare minimum you can do this by researching the things you have to pay for such as your utility bills etc. Also research you credit cards and loans etc to get your self on the latest best deals. Consider a remortgage or secured loan to consolidate everything. And finally if you are at the last resort get your debts together and start ringing your creditors and making deals with them, but do your homework beforehand. Above all lenders like contact lots of contact ring them before they ring you and you will be better off straight away.