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Debt Management for Tough Times

By Janet Lacey
Published: Tuesday, November 10th, 2009

The number of people in America who are in a bad debt situation has risen up drastically during the past two years. People with regular incomes and a comfortable lifestyle have suddenly found themselves insolvent and in a poor credit situation. If you are facing a situation where your debts are absolutely getting out of hand and making your monthly payments has become almost impossible, then you need to look at some serious debt management. 

Some of the main things that will help you in managing debt when times get tough are: 

Credit Assistance Programs And Counseling: The first thing that you need to know about professional debt management programs is that these have often led people to even more troubled waters than what they were experiencing before. Instead of paying someone more money when you are already short of it, search for credit counseling that is offered free without any obligation. A number of government and non government support organizations are offering credit help for free. These experts will be able to offer solutions ranging from small money saving tips to debt consolidation depending upon the severity of your problem. 

Budgeting: Sit down and make a list of all your monthly incomes and all your expenses. Include all pending payments and bills in your expenses. You can always find that there are a number of items on the expenses side that can be cut down. Think of options like car pooling instead of driving alone, doing away with some channels on your cable TV, cutting down on mobile and internet bills etc. If your situation is really severe, then think home cooking and discount coupons instead of frozen meals and take- outs. Try to reduce expenses so that the maximum number of bills get paid on time. 

Borrowing Money From Family, Friends And Yourself: Under certain situations, you can borrow money from your IRA or 401(k). In case your savings outnumber your debt considerably, you can check out ways to do this. If not, you may borrow interest free from family or friends. However, make sure that instead of spending this money, you only use it to pay off existing high interest loans. Also, treat these loans like any other loan and draw up a repayment plan and adhere to it. 

Apart from the above mentioned ways of managing debt in tough times, some other options that you can consider are using balance transfer cards and debt consolidation loans. You should also explore refinancing options for your car loan or mortgage since you may be able to get lower interest rates and better repayment terms with a refinance. Also, the moment your debts start getting out of hand, try to call up your creditors and ask them to help you out either in terms of waiving some part of the debt ( interest amount, late fee) or in providing you with better repayment terms. Make sure that you explain your situation clearly to them and be practical with your demands.

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