It’s easy to get into debt, to take all kinds of loans, but it’s not easy to repay them, especially when the amount of debt becomes threatening. We found out what you need to remember to get out of the circle of debt.
When you start fighting debts, the most important thing is not to panic and not despair. The experience of successful people shows that you can get out of the deepest “debt hole” by showing perseverance and following a few simple tips.
Tip 1. Notify creditors
If one day you realize that your wages are no longer enough to pay all the loans, then you do not need to hide your difficulties from creditors. Do not try to hide from them at all. It will almost certainly not be possible to avoid retribution, but you have every chance by maintaining a good relationship with the bank. You may request debt restructuring – thus you will be able to make smaller monthly amounts. In addition, this way you reduce the risk that your case will be taken to court – after all, the bank is interested in returning its money, and not in lengthy litigation. And if you demonstrate your willingness to pay but ask to change the payment schedule, then it is likely that they will meet you. This option can even help you maintain a good credit history. Unless, of course, you still want to use loans in the future.
Tip 2. Pay a little regularly
If the amount of your debt seems unbearable to you – do not despair and do not stop making payments. Spend at least 10% of your income every month on repaying the debt – firstly, this way you will gradually get closer to the goal. And secondly, this is how you accustom yourself to financial discipline. A very important point is to understand that you will not be able to repay all your debts at once, but sooner or later you will close the debts by repaying loans gradually. And in the future, the habit of saving 10% of every paycheck will help you make savings.
Tip 3. Make larger payments every month
Try to deposit more than the minimum regular payment on your loan or credit card every time. You may think that the minimum payment saves you money, but in fact, the opposite is true. By paying more, you can pay off the debt faster, which means that overpayment will be less. In addition, approaching the desired goal will motivate you to take further action.
Tip 4. Pay off expensive loans first
If you have several different loans that you cannot repay at the same time, then start repaying them one by one. It would be logical to give preference first to those debts with the highest interest rates. The faster you repay them, the lower your debt service costs will be, the faster you can get even with the rest of the “cheaper” loans. Of course, at the same time, you should not allow delinquencies on other loans – fines and late fees are not the best helpers in repaying loans.
Tip 5. Pay off small debts
If you have already paid off the most “expensive” debts or the interest on your loans is about the same, then repay small loans. Pay off all the small debts that you can quickly pay off, then you will immediately notice how the number of your loans decreases. And this, in turn, will serve as a good motivation in order to move further towards the goal: after all, if you have repaid these debts, you will definitely pay off the rest!
Tip 6. Refinance only expensive loans
In some cases, you can take out a new loan from the bank to cover old debts. Refinancing can reduce the interest rate on your loan but also increase its term. However, you should remember that refinancing is not always profitable. This procedure is not free, you will have to pay commissions and other payments when applying for such a loan. So if the difference in the rate is not significant, the costs may turn out to be even greater than when paying off the old loan. Therefore, it is worth refinancing only those loans, the rates for which are much higher than those currently offered on the market.
Tip 7. Manage your finances
Get your finances in order. It may turn out that you spend most of your income on things that you could refuse, and use the funds to pay off debt. Write down your expenses – this will help you systematize them and identify reserves for savings. Financial advisers say that the path to financial freedom begins with getting your personal finances in order. Make a financial plan – so your expenses will become planned and consistent with your income. And besides, avoid unexpected expenses, because your first priority is to pay off your debts!
Tip 8. Increase your income
If your current income is not enough to pay off all your debts, take care to increase it. However, it is worth doing this only after you have listened to the previous advice – after all, irrational expenses can absorb most of your income, and then it is pointless to increase them.
If you have already put things in order in your finances, then think about additional earnings. There are various options here: you can just find another job. But if this is not possible, then you may be able to take on additional responsibilities, which will lead to an increase in wages. In addition, your hobbies may bring you additional income: for example, if you like to sew, knit or cook. Think about how you can make money on what brings you pleasure.
Tip 9. Sell something you don’t need
You don’t have to buy something unnecessary. Some experts even advise selling a TV. After all, it takes away your free time, which you could spend with benefit. In addition, during the crisis, you can certainly sell the second car, and maybe even the first one: this way you will save on its maintenance, and you can pay off the loan with the proceeds.
Tip 10. Don’t take out a new loan
If you are determined to pay off all your debts, then the most important rule to follow is that you should never take new loans! If you do not have enough money for regular payments – ask the bank to restructure the debt. If you do not have enough money to live on – get rid of unnecessary expenses or find additional income. But give up consumer loans and credit cards.
Tags: debt, finance, loans, money