In today’s world, it is usual to get lost in a debt spiral. Due to lots of factors, spending money that we don’t posses comes naturally for us. From an early age we are taught that it is ok to take a credit for anything, and it is ok to have not just one, but several types of loans.
Whoever desires a high education has to pay for it. And because you can not pay always in cash, the lenders give you a loan to pay your educational taxes. This is a little unfair, because not everybody can afford to take a job and pay monthly for the loan. It doesn’t matter, because somehow you struggle with the system and manage to succeed in finishing your studies and pay at least partly on the loan.
Next, there comes a credit card that can help with small daily needs. You are working already and because sometimes the money is not enough, you apply for a credit card.
After this, you realize you need a car to be able to travel from one place to another, be it to work or another city. This requires a new loan, and now you have the car of your dreams. But keep in mind that the car costs more than just its price actually. You will have to pay for gas, insurance, servicing and other small things.
And finally, because everybody wants to own a place called ‘home’ – you go hunting for a one room apartment, a house with a yard or a condo in a sky-scraper. It will not count, because the agency will present you with a ‘payment plan’ so organized and clear that you’ll fall for it and get another loan or mortgage.
Except just a small percentage of people – and those can afford to pay in cash – the rest of you, or better said, the rest of us, have to pay with a loan.
From an early age you keep adding wish after wish, bill after bill, loan after loan, and in a few years you will wake up one day and realize that the sum is too big for you and it became unaffordable to be paid month after month. Realize that just in a few years you got a loan for studies, a credit card, a car loan and a mortgage. If you managed to pay for your studies, you still have the credit card – that you think is very useful, the car loan – you do use the car daily and the mortgage – it’s your house you’re paying for. So there you have 3 types of loan.
This is a debt spiral. This is a situation when your debts are increasing and the next step will lead you to debt default. The spiral is easy to follow – you start from ‘no loan’ or ‘no debt’ to 2 or 3 loans. The debt includes now not only the money you actually took from the lender, but also the interest. So after you sum up these 2, in the end you will realize that you give back so much money that your daily needs can not be sustained anymore, or your prioritize your needs and will not be able to pay your debt.
It is not easy to break apart this kind of thing – one loan leads to another and so on. What you have to do now, after you realized that you’re in trouble, is to find solutions. It’s like an addiction actually – the more you have, the more you want. And this way of thinking is what got you here in the first place.
So, first of all – realize and accept you have a financial problem. Take a piece of paper and write down on it all that you have to pay every month – bills for electricity, phone, energy, etc. Write also what you have to pay to the lenders – for your credit card, for your car, for your house or whatever you have to pay. Also, consider what you pay for food and other necessities (and only necessities) you have. Sum it up and be amazed.
Now compare the result with your monthly income. If you can afford to pay your debts and the resulting sum is smaller than your income, then you are on the good road. But if the income is smaller than all your expenses, then this is a turn point in your life. It is the time when a solution is required, because equilibrium is necessary in your life.
You have to think about what you can cut from your expenses. This means that you must think in the way of saving money firstly. For example – if you get a pack of chewing gum every day, then stop using so much gum and buy just a pack per week. Next proceed identically with al the things that are not essentially necessary for you and reduce the quantities, or cut them out. Other thing you can try is to let your car at home and use common transport. Anything that can save you some bucks it’s worth it. On the long run, this will lead to a reduction of your expenses and an increase in your budget.
Depending on your loans, you can get professional help. You can go for a debt consolidation and sum up all your credits/loans into one. The lenders usually agree with this kind of practice, because this works in their best interest.
So instead of 3 loans, you will contract just one, and also – the most important – pay just one. There are so many offers available on the market today, that you will surely find a more convenient loan with a lower interest. This will make the monthly payment a lot smaller than what you used to pay before.
It is important you get out of the debt spiral through any mean available and possible to you. Having a financial security is very important and getting the right kind of help will keep you balanced on the long run.