Debt Survival Strategies

Debt problems can seem like an unsolvable problem, and a constant worry over how you can keep your various creditors off your back while still having enough money to get by. Under these circumstances it's easy to feel like you're struggling alone, but this isn't the case. Money worries are nothing new, and while it might seem at the moment that your problems are overwhelming, millions of people have been in similar situations and sucessfully fought their way out of debt.

A quick search of the internet will show that there are untold numbers of sites out there offering debt advice and solutions, sometimes for free but often for a fee. The information on these sites can be too much to take in - so how can you even begin to get together a debt survival strategy?

There are several basic debt strategies, which we'll outline below - whichever one seems most appropriate to your situation should be well worth looking into in more depth.

Keeping Track of Your Budget

This is just a simple way of sorting out your finances, and putting them into some sort of order. Making a list of all your incomes and outgoings lets you see at a glance which parts of your personal budget need to be examined more closely. You'll usually see some easy ways to cut your spending without too much pain, and every penny you don't spend is a penny to put towards your debts and bill payments.

Debt Consolidation Loans

A close look at your budget may show that ends really aren't going to meet, and in this case a debt consolidation loan might be an option to consider. The point of consolidation is to pay off all your many small (or large) debts with a single loan and a single monthly repayment. The idea is to get this single repayment to be lower than the combined amount of your current repayments, usually by getting a lower interest rate on the debt.

Another way of lowering the repayment amount is to spread the payments over a longer term, although this may well mean you'll pay more in interest overall before the debt is cleared,

A Debt Management Program

People with serious debt problems often also have a poor credit rating, and so might not be able to get approval for a debt consolidation loan. Maybe payments have been made late or missed, or it might be simply that the overall debt level is so high that no lender is happy to advance further credit.

Debt management is an option to consider when things come to this stage.

The basic idea is to have a debt management company or agency take over the admin of repaying your debts, getting in touch with your creditors and trying to come to some sort of arrangement that will result in lower repayments - by, for instance, restructuring the debt over a longer repayment term, or negotiating a lower rate of interest. The most immediate benefit is a reduction in stress levels now that someone else is taking over the day to day handling of your debts - although the responsibility for repayment is still yours of course - but there are two major disadvantages: you'll be charged a fee in most cases for this service, and your credit rating will be significantly harmed.

IVAs (Individual Voluntary Arrangements)

This is in some ways similar to a debt management program, in that you come to an arrangement with your creditors, but the big difference is that under an IVA these are legally binding. Also, after sticking to the agreement for 5 years, any remaining debts will be legally written off.

An IVA is really a 'last chance saloon', and if you break the terms of the arrangement bankruptcy is almost inevitable.

Going Bankrupt

When all else fails and debts simply can't be serviced, than bankruptcy is the only option.Your assets will be frozen and disposed of to clear your debts, and during the bankruptcy period your income and earnings will also be seized in part to go towards lowering your debts.

Your credit rating will be damaged almost beyond repair, and although many commentators suggest that bankruptcy is becoming an 'easy way out' of debt problems, the effects of going bankrupt will be felt long into the future, making it a very serious decision to take.