If you are having financial trouble it is essential that you understand the ins and outs of debt. Particularly the acknowledgement of debt letters. You need to follow the right protocol when you have received debt letters and warnings. Otherwise you might find yourself under severe penalties or even blacklisted.
In today’s fast paced world where everybody is under pressure to own property, vehicles and assets. Or to have cell phones and material goods, it’s easy to fall into debt to pay for your living expenses. Everybody wants to live a comfortable life where they want for nothing. And are able to enjoy all the modern day luxuries.
The general consensus among people is that you cannot live your life without some form of debt. The trick is to keep control of your financial situation.
Never live beyond your means.
Understand how to handle your money and never to get in over your head with money.
Acknowledgement of Debt Letters: How do you get into debt?
To take out a loan or open an account, financial service providers will want to be sure of the following. This before they will approve your loan or allow you to open an account.
- Financial service providers will want to see that you have a regular, reliable income. One that will allow you to cover all your essential living costs. As well as your loan or account payments every month.
- Financial service providers will want to be sure that you have a good credit record. Also that you have, in the past, made your monthly loan and account payments timeously and in full.
If you qualify on the above two requirements, your loan or account will be approved. Therefore you will be granted your loan or allowed to open your account.
Many people then experience financial trouble. Some people lose their jobs or get retrenched and are unable to afford their payments. Others cannot keep up with the interest they are charged.
Some people might have had a large expense that they were not prepared for.
For example a car being written off and having to cover the majority of the costs for a new vehicle.
These circumstances can befall anyone, regardless of how prepared you prepare. It is therefore essential, if you have debt, to understand what can befall you if you cannot make your payments.
How to deal with debt that has got out of hand
It is very important, if you are battling with debt, to make sure you handle the process well. Try to do everything by the book.
Useful Information: 4 Ways to Get Out of Debt Fast
There are several areas that you should understand including but not limited to the following:
- Acknowledgement of debt letters
When you fail to make a payment in full or at all on your loan or account, you may receive a debt letter from your creditor. This letter informs you of your failure to pay. Demanding that you pay as soon as possible. And warning you of what can befall you if you do not pay.
You should acknowledge the letter. Ignoring it will land you in further trouble and show that you are unwilling to face your debt.
If you are able to pay, you should do so immediately. Then reply to the debt letter explaining that you have made the payment and apologising for its lateness. If you cannot make the payment you could apply for the debt review or sequestration process.
- Debt review
The debt review process begins with a debt counsellor negotiating with your creditors on your behalf. To come up with a payment scheme that you can afford.
Once you have applied for the debt review process, you can reply to your debt letter. Explaining what steps you have taken.
The sequestration process involves you giving up your major assets to cover your outstanding debts. Once you have applied for the process you can let your creditors know.
Whatever option you choose, it is essential for the acknowledgement of debt letters. Therefore also important to take steps to rectify your situation.
Remember: You can Repair Bad Credit Records
You can repair a bad credit record. If you have a large amount of debt or you have been blacklisted you need not worry that your credit history will be damaged forever.
The debt trap is easy to fall into. You simply cannot afford something, so you take out an account, or pay for it on your credit card.
When it comes time to pay for your credit card you realise that you are unable to, so you take out another credit card.
Eventually, if you don’t feel stressed enough, you realise that you are still unable to make your repayments. It is time to seek out some debt counselling. Although it is not always a clever option to borrow more money, but there are some solutions that can dig you out of the cycle of debt for the long term.
Refinancing is one of the ways to repair bad credit, but it is not a panacea and should also be considered as part of a bigger change in the way you spend. This involves taking action to consolidate debts.
Alternative Debt Solutions in South Africa
A great way of doing this is approaching your bank or financial institution and asking them what they have in the way of debt consolidation loans.
These loans allow you to borrow one lump sum which you will use to pay off all of your outstanding debts. This leaves you with only one manageable payment to repay every month, at a much more affordable repayment rate, and often with a much better interest rate.
It helps you to take a step back and breathe, and to take control of your finances.
When you pay your bills in this way, your credit rating will slowly start to improve. Yes, you will have a blip on your history, but this small blip need not turn into a lifelong cycle of borrowing without hope of repayment. You can breathe easier in the knowledge that you can repair bad credit without too many headaches.