How to settle your debt

Less is more – signing up for a larger loan to settle all of your other debts is sometimes the best solution to live a debt-free life

08:29 07 October 2013

Is debt settlement the right thing for you? This is a difficult question to answer. Many people think that it is the right thing for them, but soon find out that they were too optimistic and wishful in thinking that they can pay back the new debt by means of debt settlement. Here is exactly what you have to do, step by step, to find out if debt settlement will work for you:

• Scrutinize your financial situation carefully. Calculate the amount of money you spend on each of your loans and don't leave any blind spots – you have to deal with all of your debts in this phase;

 

• Search for any other option to debt settlement before trying it. You never know you may sometimes find better solutions such as remortgaging, which offers lower interest rates;

 

• Try to determine how debt settlement will have an effect on your credit rating, as other lenders may not wish to lend you any longer if your credit rating has to suffer as a result of the settlement;

 

• List all of the debt settlements available in your area and compare the offers made to you to find the one that suits you best. Look for the lowest interest rates and, of course, for the least possible monthly repayments that you have the funds for;

Once you have done all of that, you can start the process of debt settlement. But you have to remember that this process is not an everlasting solution to your debt problems, only to your current debt problems. The temptation is to think that all of your troubles are now behind you, but a better way of thinking about is that you’ve simply streamlined your problems to give you some breathing room.

If you do not correct the mistakes that you did in the first place, you will soon find yourself in a position where you will build up more debt. So try to avoid that at all costs by changing your financial habits.