Good Debt Management and Common Sense

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by: stickystebee
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Word Count: 393
Date: Sun, 24 May 2009 Time: 6:01 PM
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They say that debt management isn't rocket science. This is true but good debt management does need good common sense. If you are one of those people who are struggling with a number of different debts and shuffling payments between them, then now is the time to make a few key decisions.

One of the first decisions that should be made is to pay off the most expensive debts first. This is obvious common sense, but it is surprising how many people fail to do it. If you have a range of credit cards that are charging different rates of interest, then you should first seek to transfer the balances on the most expensive cards to cheaper ones. If your credit rating is still reasonably high, you can often obtain a new card that will allow you to transfer balance to a no interest account for a limited period. There may well be a fee to pay, but mostly it is worth it assuming that you are transferring a reasonable balance.

You should seek to downgrade the interest on your cards and other debts until you are happy that you have minimised interest payments. Next you should set up direct debits so that the minimum payments are made automatically on all your cards, and you should use any spare cash to make additional payments on the most expensive card until that debt is cleared, then move on to the next most expensive debt.

If you are not in a sufficiently liquid situation to be able to do that, then there are other options available to you. You could consider debt consolidation. That means taking out a loan that will pay off all your other loans, but will allow you to make lower payments. Of course this will probably mean that the debt will be incurred over a longer time, but at least it will mean that your debts are under control and you can see an end to them.

If you are going to do this then it will need some strict discipline. Clearing the balances on your cards does not mean that you can start building them up again. Once the balance is cleared, cut up the card. Tell yourself that you don't need it.

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If you are not in a sufficiently liquid situation to be able to do that, then there are other options available to you. You could consider debt consolidation. That means taking out a loan that will pay off all your other loans, but will allow you to make lower payments. Of course this will probably mean that the debt will be incurred over a longer time, but at least it will mean that your debts are under control and you can see an end to them.