The problem of debt is every growing. Any household you talk to would admit that they are in some debt, or just fought back and resolved a debt situation, and many are struggling hard with debt. Businesses also are struggling hard with debt, and almost any business small, medium or big have some debt on their head. Hence debt is quite a common thing in the life of individuals and entrepreneurs.
However, saying its common does not shift the seriousness of the matter anyway. Debt is a liability, and when it’s unmanageable, then the liability worsens enough to impact life, earnings, stability, business, and mental peace and well being. That is why debt must always be taken seriously and managed on time before things fall out of place.
Manageable and unmanageable debts
Some debts are manageable while some are not. It depends on what state you are left in after paying off the debt each month. Usually, debts or loans are paid off in EMIs. And each month you have to pay a fixed EMI. Hence the month’s calculations and budget depend on the EMI a lot. After paying the installment, you have to check how much you are left with to save, spend, and invest. And when you have enough in hand for all activities, then you are into a manageable debt.
Any other financial statements, where you are affected somewhere, in one or more ways due to the loan EMIs makes the debt unmanageable. An unmanageable debt leaves you in a puzzled, confused state both financially and mentally, and kicks the life out of you as you try to manage through every month with great stress. Debts have to be taken seriously, and solutions to them must be figured out as soon as possible when you know that they are unmanageable.
Consequences of unmanageable debts
Unmanageable debts would always come with lots of nasty consequences. Some of the common ones are as follows:
- You will see that you have no money left to cover all household expenses after the debt payment
- You will see you have nothing left to save for future after taking out loan EMI and household running costs from earnings.
- You may discover that after taking out household expenses and vital fees and costs you have no money either to save or to pay the debt off, and this can result in consistent late payment of debts, and eventually may result in skipped payments, erratic payments, and finally stopped payments of the installments.
- While you skip payments, you can accrue penalties for late or non-payments on top of previous penalties, thereby adding more to that debt.
- Repeated non-payments and missing of due dates can result in recovery calls coming to you from the creditors.
- Your credit score and credit history both will get affected thereby reflecting your defaulting.
- You may receive legal notices for the action of your collateral etc. if you are not paying any installments for many months.
What to do when you are facing one or more of the above consequences
The first two consequences still keep the situation under control, when some adjustments in your budget or savings etc. can help you get out of the dangerous condition. The other consequences are more serious, and leave you no more room than to go for a debt relief program. Various types of debt relief solutions and ideas can be obtained through the study of helpful resources like nationaldebtrelief.com/.
Study your debt situation
Before leaping to any conclusion, or trying any ideas, you must first analyze your debt situation. Calculate the following first:
- How much of cumulative interest and installment you are paying each month towards all your small and big debts. In case, you have only one debt then also calculate how much exactly you are paying towards its EMI.
- Find out how much interest rate you are paying for at present.
- How much of the debt is still left to pay if you join all the EMIs in the tenure?
- Do you have a stable income to pay a smaller amount of money towards loan repayment provided you get the chance?
- Does your current credit score allow you to avail a debt consolidation loan?
The above points will tell you where exactly you stand at present. Based on this, you will be able to think and decide if you can consolidate your debts.
What is a debt consolidation loan?
A debt consolidation loan is a loan, which is availed to close all existing debts. This loan is offered at a much lower rate of interest than your current loan interest rates. The motto behind this loan is to close all your existing loans so that you need not focus on multiple EMIs and management of numerous debts, and instead may focus only on one single manageable debt. To make this possible the debt consolidation loan is made a low rate of interest and longer tenure loan, which is easy to manage through small EMI amount, which your current monthly earnings allow you to pay after taking out necessary living expenses.
There are mainly two criteria to take a debt consolidation loan. And they are a stable monthly income and a healthy credit score. Since your non-payments of old or existing debts affect the credit rating badly over time, hence it’s always smart to avail a consolidated loan before it’s too late. You must analyze your difficult situation early on and take the step, and should not let the credit score suffer so much that you can’t even avail a consolidated loan.
If you cannot obtain a debt consolidation loan, then other debt relief options like debt settlement, other mortgages, bankruptcy, etc. can be explored. However declaring bankruptcy should be the last resort, and before trying that you can always search for a debt consolidation service that helps you even when you have a bad credit score.