Debts are easy to acquire but hard to get away, it may take just a few months to amass debt and years to settle.
Everybody has their own means of paying off debt. Combining strategies and abiding by it strictly until the debt is gone is one way to do it. Not many can handle debts and a starting point to get going, here are some ways to start off.
No More Debts Please!
Debts are like holes in a pipe and if you don’t block them the water keeps gushing out from everywhere while the bucket remains empty. Reducing your debts will stop things from looking worse because nobody can be debt-free the intention is to keep it within your hold.
As a first step towards debt reduction, avoid credit cards which are known for creating debts.
Let Your Monthly Payments Go Up
Paying less towards your debt balances per month will by all means delay the closure of debts. Adding to the woes is the exponential increase in interest rates that will increase the timeline for debt repayment.
If the debt is due to the credit card then no wonder the average credit card interest rate keeps going up every year. By increasing monthly payments one of the outstanding balances can be shown the door.
Emergency: A Life-Saving Kit
An emergency fund can save you from debts if you are not thinking about using it for paying off debt instead of diverting the funds to your savings account. These funds provide you with security during an emergency or a financial crisis. An ideal emergency fund is one that can help you sustain for six to twelve months. By default, try to add whatever you can into a savings account. Take help in the form of a payment app to meet your daily expenses and let the earnings be a part of the emergency fund.
Identify A Big Debt And Close It
A basic and simple approach to manage your debts is by focusing on one account and making a big payment each month before it is completely repaid. All the other minimum payments done for other accounts will only bring down the debt by a small amount.
Streamline and prioritize the payments one by one in the descending order until all are paid off.
Look Out For Ways To Generate Money
Relying on your job earnings alone might slow down the chances of clearing debts. Think of freelancing or a part-time job, the earnings from which will solely be used for the monthly payments. If you continue paying smaller amounts the debts are not going away soon.
Plan your expenses carefully because every penny means a lot in the long run.
Mutual Settlement With Your Creditors
When you are ready to settle the debts, convince or request your creditors for a one-shot payment if you owe more money than the repayment period. Creditors who are fine with the settlement may also cancel the rest of the debt provided if your accounts are at risk of defaulting.
Other Ways To Address Debt
A fund that can come to your rescue at a time when you need the most is worth spending for and why not? Risky, but will definitely take off the financial pressure. A life insurance policy would have accumulated some cash, try if you can take out a debt. However, borrowing from an insurance policy as an option may affect the benefits at the end of its tenure and your beneficiaries.
At the end of the day, it all boils down to how soon you close the debts one by one because the accumulation of debts can eventually affect your financial savings and all the earnings will go in clearing it.
By Karthick V.