Debt loop – how to get out of financial trouble

1 Oct

 

The financial crisis, and sometimes laid-back lending money led to a situation in which about 2 million Poles have overdue payments for a total amount of almost PLN 40 billion! These debts are not only outstanding loans at banks, but also forgotten bills, rent payments and even fines. The tightening credit loop is a problem of the growing number of indebted countrymen.

The credit loop tightens imperceptibly

The credit loop tightens imperceptibly

There are many reasons for falling into a credit spiral, but most often we are ruined by ill-considered large loans (e.g. for the purchase of a car) combined with uncontrolled expenses financed by credit cards. When we draw new loans to pay back urgent installments, we can conclude that we are in a debt loop and our lives will never be the same again. Phones from debt collectors (usually at family dinner), written reminders for which you have to pay extra and ultimately a bailiff – this is the world of the debtor. The debt loop tightens slowly but inevitably. It will not disappear without our participation, as if by magic. You will need radical, sometimes painful actions.

Fight bad debts with discipline

 

For debtors brushing against a financial disaster, advisers have developed a canon of proceedings aimed at limiting personal debt. They didn’t invent gunpowder, they rather ordered some rules. The debtor leaning against the wall should above all formulate a plan to get out of trouble. Advisors suggest that you draw up a reliable list of monthly receipts and expenses. It will probably turn out that there will be nothing left to pay off the debt. However, it is worth realizing the problem and “recalculating” it on a monthly basis. This will help you make the right decisions.

For trouble consolidation

For trouble consolidation

Taking out random loans to repay even a part of the outstanding installments and avoiding settling the remaining ones is a simple way to personal bankruptcy. Overdue debts are growing very quickly, and notorious debtors are in the habit of repaying only those creditors who without a pardon and brutally press them against the wall.

So there is a better way to get out of the debt spiral. It’s a consolidation of liabilities. It consists in converting several, and sometimes over a dozen unpaid loans into one, repayable. Where can you find such a loan? It is provided by banks or financial intermediaries. The latter will help you analyze the situation, but we must make the final choice ourselves. The consolidation loan will have a clearly longer repayment period than our outstanding debts and – thanks to that – the repayment installment will be much lower than the sum of installments from outstanding liabilities. Of course, during repayment of the consolidation loan (long repayment period) we will give the bank or other institution much more, but the monthly installment will fall to bearable levels. We will repay it with current income only tightening the belt slightly. The debt loop will begin to relax slightly.

Beware of Bankruptcy

Beware of Bankruptcy

However, when the unpaid debts reach a size that prevents them from being offset by a consolidation loan, we only have to declare personal insolvency (so-called consumer bankruptcy). But this is a completely different story – not many Poles benefit from consumer bankruptcy, because it leads to the loss of all assets, including housing.

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