Secured Loans

Understanding the Responsibilities of Someone in Debt

Someone who's in debt has the responsibility of repaying his or her creditors. However, by the time many consumers get into debt, their finances may have already spiralled out of control, and paying off creditors may not be as easy as it sounds. Debt advice is available from local authorities, charitable organisations or fee-charging agencies for consumers who are having difficulty meeting their financial obligations.

A lending agreement is a binding legal contract in which the borrower agrees to repay the money that he or she has borrowed within a certain period of time. Most lending agreements also set out terms like the interest rate on the loan and penalties for late payments or missed payments. When you take out a loan, you have the responsibility of reviewing these terms and planning responsible repayment before you sign the contract. Your signature indicates that you agree to repay your lender. If your budget is already stretched, you may end up in serious debt if you take on a new loan.

Facing Up to Debts

For many consumers, confronting the reality of debt is the first step in recovering financial stability. If you've borrowed money to buy a house, a car, cover personal expenses or consolidate other loans, you have the legal responsibility for paying off those debts. Defaulting on a loan or a credit account can have severe consequences, including a court judgment against you, repossession of personal property and a negative impact on your credit rating. Facing up to these consequences may motivate you to seek help if you've been avoiding your creditors.

If you've been avoiding phone calls and letters from your creditors, facing your responsibilities may bring you a sense of relief. Trying to ignore your financial commitments is often much more stressful than simply facing up to them. By contacting your creditors to discuss your financial situation, you may be able to arrive at an arrangement that will allow you to pay off your debt within a reasonable time frame. Many lenders prefer to work with their customers to avoid repossession or legal action rather than going to the trouble of pursuing a bad debt.

A debt advice agency can be a valuable ally if you can't reach an agreement with your creditors or your relations with them have broken down. Debt management companies will negotiate with your creditors on your behalf to reach an affordable repayment arrangement. However, you must take the first step to seek debt advice and find a way to resolve your debts. Otherwise, your creditors may take you to court or have your property repossessed if they are not satisfied that you have tried to pay off your loan.

Finding a Debt Repayment Plan

Consumers who are struggling with debt may choose from a number of repayment options. With a debt consolidation loan, you can combine several high interest debts with a single loan at a more favourable interest rate. Rather than paying off multiple creditors each month, you'll only have to worry about making one repayment. With a debt management plan, a money advice agency will help you make arrangements to repay your creditors in affordable monthly installments over a set period of time.

Understanding the responsibilities of someone in debt may motivate you to seek help with your finances. Once you've acknowledged the need to pay off a loan, you can take steps to work with your lender to clear the debt. Facing up to your responsibilities may give you a new sense of freedom and help you take control of your budget again.