So you have gotten over your head with debt – it happens and it can happen quickly and easily.  All it takes is a batch of medical bills that have extensive out-of-pocket costs; a legal situation; lost or decreased employment; loss of a spouse etc… Those aren’t the only ways for expenses to spiral out of control but they are some of the larger ones.

We are not immune to it – no one is.  Personally, we have had just about all of the above and it is so so hard to dig out from.  We have done it over and over but each time we wonder if that will be the last time.  The most recent was an issue with our adult daughter and her three children.  This was not something we were expecting but we felt we had to help.  Never in a million years did we anticipate the financial hole that would get us into.  We will get out of it but it will take years and a great deal of financial discipline.  Fortunately, we have been down this road before – and even for reasons with her.  We will survive it and you can too – with time and discipline.

Debt Consolidation with Trout Associates

Balance transfers

One of the easiest ways to consolidate debt is to do balance transfers with your credit cards.  Apply for a new credit card by researching those with low or zero interest rates for a period of time.  Once approved, transfer balances from your higher interest rate cards to your lower interest rate card.  Pay off as much as you can at a faster rate once transferred.  You will most likely not be able to pay off that debt in the prescribed period – for example, a year.  So as you near the deadline – call for an extension which you may or may not be granted, or apply for another low-interest rate card and do the process again.  Do this as much as you can until your debt is paid off.

Low or no interest balance transfers will save you a ton of money along with cash forecasting – as long as you leave those cards before the expiration date of the offer.  If you don’t, they can apply all the interest you would have been responsible for and then you will have saved nothing and you could end up in a worse financial situation.  Recordkeeping and planning will be critical.

Trout Associates Talks Personal Loans

There are two types of personal loans – secured and unsecured.

Trout Associates View of Secured Loans

A secured loan is based on some form of collateral.  Essentially, if I am asking for a $10,000 loan – do I have $10,000 worth of assets to back that up in the event I can’t pay it back.  You could use your home as collateral or a car, boat, RV etc… It is important that you consider your ability to pay back this loan because you will potentially lose your collateral if you fail to.  Is it worth losing your home?  Is it worth losing your car?  In many cases though this secured loan is the exact answer to the problem and as long as you are disciplined, the debt will get paid and you will move on with your life as planned.

By the simple nature of a secure loan – these loans tend to be available for higher amounts and they are easier to get.  After all, what does the banking institution have to lose.

Trout Associates View of Unsecured Loans

An unsecured loan is a loan without any type of collateral.  Therefore, basically a bank is giving you this loan “on your honor” and they have alot to lose.  For this reason the loans are smaller and much more challenging to get.  These rely heavily on your credit score and work history and may even take into account your stability in your home (how often do you move).  If you bounce from job to job you are definitely a risk because who knows when you won’t have one.  And if you move every six months you definitely give the impression that you are constantly running from something and will they have trouble getting payment from you – having to chase you down every so many months.

Save Money

You have a plan to pay off your debt but you need to also reduce your spending – thereby giving you more money to pay off your debt and get out of debt more quickly.  There are many ways to save money – nowadays you can save a ton of money just by using your cell phone with all the money saving apps.  Even if you use your phone just for store coupons – if you go to CVS – pull up their app; if you go to Big Y – yup pull up their app; Dollar General – same.  There is a way to save money almost anywhere you go or even when you are shopping online.  I’d love to say no more shopping but the facts are you need to meet your basic needs as well as those of your family.

What Next?

After you get it all paid off – I suggest strongly you get a copy of your credit report.  Study it and close all accounts you don’t need so you don’t find yourself using them again.  Clean up the report as much as possible.  You should always keep something for an emergency because after all if you break down on the side of the road or need to finance something critical immediately – you don’t want to end up not being able to.  I can’t imagine having no credit cards left, no cash in my wallet and being stuck on the side of the road with two special needs children because my car broke down again!  Yup – that car is trouble.  But, I own horses and need a barn type of vehicle.  Problem is we drive great distances with it so when we break down, we could be in the middle of nowhere and very far from home.  So for safety reasons – keep one credit card.  Once your debt is all gone you should be able to pay it off quickly – perhaps even as soon as the bill comes in.  But who walks around with a sizable amount of cash on them?  Carrying a bunch of cash could lead to safety issues just as easily.

As a very last resort there is also bankruptcy but recovery from that can take far longer than it would take to just consolidate and pay off your debt.  I highly recommend trying to work through debt consolidation first.  If you cannot manage the above recommendations on your own get assistance as soon as possible such as through Trout Associates.  Don’t delay – the problem will not go away on its own.  And I hate to rely on the cliche but it is true – the debt didn’t get there in one day it isn’t going to go away in one.

Throughout all of this there can be an emotional aspect to the financial struggles.  It is cause emotional finance and please remember to take care of yourself.

Moving on will involve discipline and making some changes.  Until your debt is paid off you may need to eliminate some things from your life, even if temporarily.  Don’t look at it as a loss – look at it as a plan and a way to reach your goals.  come up with a plan to get out of debt.  For example with the debt consolidation it may or may not have consolidated all your debt.  If not you need a payback plan.  In this case it would make most sense to pay back the lowest interest rate bills first.  There are other opportunities but this may be the best – use your personal situation to come up with a plan that works for you.