One Stop Mortgage Corp Blog

What To Do When You Owe More Than You Have

November 7th, 2015

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Last week we talked about the ominous spectre of debt and how, when you think about it, like most childhood monsters, debt can’t really harm you if you have a firm handle on how to defeat it. Debt such as mortgages and loans intended to pay off home renovations or invest in small businesses is considered good debt. Good debt can give you a kickstart when you need it and it can give you leverage as you get older.

But there are times when bad debt creeps up and threatens to overwhelm.

Good debt, bad debt, it all comes back to monthly payments, right? Money in vs money out. We’ve all been in a situation at some point in our lives when we simply didn’t have enough to cover ourselves, and we’re left owing more than we actually have.

It’s tough to see in stressful times like these, but you still have control. Here are four steps to take when you find yourself up against the wall.

 

1. Doublecheck Your Budget

Our first instinct when we get loaded up wth payments is to try and ignore the problem. We turn our backs, hoping it will magically go away.

But it never works that way, does it?

No, the best course of action is to confront your debt and take a hard look at exactly where your money is going each month. Write out a budget and then look for non-essentials you can cut out.

Do you really need cable? Can you do with fewer clothes for awhile?

Find something you don’t need and stop spending money on it.

 

2. Consolidate Payments

This still won’t solve your immediate problem though. You have payments to make regardless of what your budget will look like in the future.

Consolidating all your payments with a debt consolidation loan relieves you of urgent bills and lets you pay off a single loan at a pace you’re comfortable with. It cuts out some of the outrageous interest payments you’ll face in the future with multiple payments and leaves you with a single interest payment in a single loan.

So, instead of a phone bill, a car payment and a mortgage payment, debt consolidation moves your debt to a private alternative financier who will work with you to get out from under your debt.

Yes, a private financier like us!

 

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3. Plan an Exit Strategy

The key is to ultimately spend less money in the future. If you’ve studied your budget and secured a private loan or mortgage, at some point you want to know what your exit strategy will be.

How will you pay off the new loan? Even with all your payments consolidated, you still need take care of your debts eventually. Plan a strategy and then stick to it. 

Again, it comes down to the things we need vs the things we don’t need. Often people require debt counselling or consolidation because of unforeseen circumstances, so stripping out material possessions that don’t actually add a lot of value to our lives gives us some cover in case something bad happens. Set realistic goals for your future that give you enough time to get your financial affairs organized.

Time is money, and in the world of alternative financing, money also takes time. There’s no rushing the exit strategy - the whole idea behind alternative loans is to pay off your debt over a longer period of time without the stress of your bills breathing down your neck.

It’s still up to you to take the first step though.

Need help with your debt? Contact One Stop today!

 

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