Learning from Bad Credit

Anyone can get into debt. It’s easy and as a person with debt, you are among the majority rather than the minority. It’s a sad fact that we are living in a Live now, pay later society that encourages it, and it’s small wonder that many sink under the depths of debt and find themselves in trouble.

What many people in debt don’t appreciate is that their indebtedness offers them an opportunity to understand economics. Every negative in life offers a way forward and although when you are in depths of debt that story is a hard one to see, it was at just this juncture that I realized exactly what was happening and decided to do something about it.

My credit rating was about to be taken from me. The bailiffs were writing me letters, and the small claims court threatening me with action if I did not pay outstanding debts.

The way to learn the lesson is to:

*Start over afresh


If someone in deep debt is a realist like me, they do get to a point when they need to examine where all that hard earned cash is going. The investigation is painful. No-one wants to admit failure, though to do so is wise, even if the confession is only to yourself. Taking a list of income and outgoings over the last six months is a real eye opener.

What you realize is that those easy options that the advertisers offered you were not such an easy option as you thought. Of course you can spread the cost with credit cards. They urge you to do so, because this is how credit card companies make money.

Taking the credit cards first, what I did was add up what those items were costing me, and I was shocked that the payments I made every month didn’t even touch the amount that I owed. Little by little I was digging the hole that buried me deeper. What I was paying was interest because I took their advice and spread the payments. Adding up what I paid every month in interest was a real eye opener. At this juncture, I cut up all of my credit cards except the one that cost me the least.

By doing this, you start the learning process. It’s a great feeling of liberation, and a little scary, though as those little bits of plastic that were burying me fell to the floor, I felt an exhilaration as if the chains were being loosened. The next exercise was adding up what each of the credit cards cost me to see what the total sum owed per month was paying interest only. I would have been paying a very large amount of money for years and it was time to put a stop to it all.

Securing your mortgage payments protects the investment that you make in your house and although I was tempted to skip payments I was very glad that I hadn’t, as the equity in my home would allow me the luxury of a loan. Lending money to pay back money only works if you work out the cost of the loan as against what you would pay in interest had I kept the credit cards. The monthly amount for the credit cards was crippling me. I had no money left for food or fuel, and was earning a reasonable wage. It made no sense at all.

Managing debt.

When I had made a spreadsheet on a piece of graph paper with all the months and noted down what I earned against what I paid out, it was obvious that something was wrong. Talking with a friendly accountant, he advised of the best place to get a loan to cover all the outstanding credit in one hit, with a reasonable rate of exchange, thus getting me out of the interest I would have had to pay on outstanding debt, and having one more controllable debt over a period of time that showed advantage against the old debt.

I learned to use the spreadsheet to estimate when quarterly bills would arrive, and how much they would cost me per month, noting down the monthly amount I would have to put by to be able to cover them without worry. Against this, I also wrote down all standing orders and monthly expenses that were unavoidable.

When I took out the one loan to pay everything I owed to creditors, I paid them immediately, and it felt great to know there would never be another statement coming through the letterbox for more payments. I had already decided I was not going to be trapped again by the element of debt that had weighed me down for so long, and took part time work, paying everything I earned into that loan to bring the period of the loan down to a manageable one where there was no penalty for early payment. After a six month period of hard work and going without luxuries, my debt was managed, and I felt like a person who had cast aside the temptation in favor of freedom.

Starting over afresh.

The television commercials continue to prey on individuals looking for answers. They offer credit cards, loans and re-financing, but they are really not offering solutions. Much of the time, it is the media that dictates how society behaves and when I see the advertisements and hear the testimonies of people that are supposed to be ordinary people like me and you, I don’t listen.

That element of life is gone. Since being out of debt, the opportunities afforded me are multiple. I can now afford holidays I would never have had if I had not taken the debt by the scruff of the neck and dealt with it, and even when the television offers re-financing, look at the interest rates and smile, because I realize that those interest rates are what cripple the gullible and I am no longer among their number.

The security within your life when you manage to get over the hurdle of debt yourself is something that can’t be bought, and that can only be learned from being in the pits of despair and realizing you are worth more than that, and that your life needs you to take control of it. Learning in time saved my home, saved my future security, and kept my credit rating intact, though I doubt I shall ever have the need for it any more. Live now, pay later doesn’t work and the amount of stress is causes isn’t worth the small gain of having things in your life that you can easily wait for until you have the cash to buy them.

It’s tough lesson, though perhaps I needed that element of debt to understand the lessons that are there for every person experiencing that misery of being held to ransom for the lifestyle they were persuaded to choose. The liberation from that kind of life is a great lesson, and I feel qualified to pass it on for others to try.