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If I'm in Debt,
What Are My Options?

by Chris Langan
07 July 2011

If you're worried about your debts, you'll want to know the best way of dealing with them. The answer - as you've probably guessed - isn't quite as straightforward as you might hope! After all, simply saying 'in debt' can mean all kinds of different things.

Type of debt
First of all, there's the type of debt to consider. Different types of debt are fundamentally different things - a mortgage debt has little in common with a credit card debt (although there are the obvious similarities, such as the fact that you'll have to make monthly payments, and you'll have to repay the whole debt in the long run).

So the way you'd handle those debts would also be different.

If you find you have some 'spare' money one month, it might be worth using it to overpay your mortgage or credit card debt. You'd have to look into the pros and cons of each approach, but it's hard to say which would make more sense - it'd depend on your personal situation.

But if money's ever tight - and you find you can't meet all your financial commitments - staying on top of your mortgage payments is simply more important than staying of top of your credit card payments (which doesn't mean you don't have to do everything you can to do that as well!).

Amount of debt
Then there's the amount of debt you're carrying. Of course, this is a relative figure as it depends on how it relates to your income and expenditure - a millionaire is hardly likely to worry about the kind of debt that the average citizen would find frightening!

At the end of the day, if you can afford your monthly payments, it's basically a matter of sticking to them all the way through, until your debt is repaid in its entirety.

If you can't afford those payments, then you have a problem. You should find that talking to a debt expert can help you figure out the best way forward.

Interest on your debt
Third, there's the interest rate to consider. If you're paying off a debt that's accruing 0% interest - and you know you can pay it off before the 0% interest period ends - you know it won't cost you any more than you're expecting.

If a debt's charging 19% per year, on the other hand, you really need to take this into account when you're figuring out how you'll repay it. The more slowly you repay it, the more it'll cost - and if the interest rate's quite high, this can have a huge impact on the overall cost.

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