With so many agencies that even offer loan online to people with bad credit record, it has become increasingly easy to get into heavy debt. Getting out of debt, however, is not as easy. If anything, it has become harder.
Being in a serious debt situation can be too depressing that you give up on finding any solution. The despair can lead you to default and cause you even worse financial status.
The first thing you need to free yourself of a heavy debt is to first believe that it can be done, even if not immediately. Only then can you strategize and be follow throw with the plan.
Here are six great ideas you can use to get rid of your debt, whether small or big, and start your journey towards financial stability.
Getting rid of a debt often requires you to adjust your lifestyle to free some cash. This requires you to live on a leaner budget by eliminating the unnecessary expenses. If you do not have a budget, it might be time to create one.
Go through your budget and list the items by order of priority. Cancel those of least importance and note those that can be replaced with cheaper options. While shopping and you find discounts or promotional offers that make sense, don’t shy away from using them.
You can also set a cash limit on the amount that you spend per week on necessary daily expenses. Set a reasonable amount so that you do not have to go without the most basic items.
Increase your allocation for debt repayment
Note the cumulative amount you pay in monthly installments on all your cash loans. Compare the amount with the amount that you are required to pay as per the agreed repayment schedule. If you have not been meeting your obligations, it is time increase the amount you have been setting aside for debt repayment.
You can also increase the loan repayment allocation if you want to clear your debt faster.
First use the money you saved from tightening your budget. If you are in deep debt, you can also take some cash from your savings account.
Prioritize your debts by interest rates
Having some order will surely increase the chances of successfully eliminating your debts. You can create some order by first listing your debts by their interest rates. Once you have created the list, make it your priority to clear the debts with highest interest rates first.
Many loans have compound interests and therefore the longer you take to pay the more you will end up paying.
In this step, if you have too many loans with high interest rates, you should try debt consolidation. Shop around for a bigger loan with a low interest rate then use the borrowed amount to repay the high-interest debts.
Ensure the loan you get has better terms compared to the overall terms of the loan you want to repay using it.
Renegotiate for better terms
Modern lending agencies aren’t so strict on the terms of repayment. However, you need to assess your situation first before going for a renegotiation.
If you have some surplus cash and want to clear your debt faster, you may ask your lenders to increase your EMI. Some lenders fine borrowers for increasing their monthly installments without notice. Therefore make sure you have an agreement with the lender beforehand.
After assessing your debt situation, you may realize that the reason you are struggling to repay your debts is because the monthly installments are too high for your monthly income. If that’s the case, renegotiate with the lender so that you pay smaller installments over a longer period.
Set up a personal emergency savings fund
Lack of an emergency fund can complicate your debt repayment plan. If an emergency occurs while you are in the process of repaying your debts, you will need to borrow more. If this is replicated severally you may end up too dependent on debt.
To avoid such as scenario, save up at least 1000 dollars as a personal emergency fund. With such an amount, if something breaks down in the house you can easily have it repaired without getting another debt.
Get some extra cash
Getting some extra cash would definitely help you repay your debts and possibly to avoid debt in future.
Dust up your credentials and start looking for a job that pays better. However, don’t quit the job you are currently holding before confirming a new one. If you are at the peak as per your credentials, take up a second part-time job.
Many companies and businesses outsource some of their services to online workers. If you have a skill such as office management or graphic designing, apply for such jobs and work a couple of hours every day from home as a freelancer.
It can be just temporarily till you finish repaying your loan.
Another fantastic way to boost your income is by selling some items in your house. Sort out your house and identify the items that you don’t really need. You can use online platforms or even sell through a garage. Use the proceeds to lighten your debt or boost the emergency fund.
Being debt free is very liberating but working towards the freedom is not an easy task. You have to create a strategy and be committed to follow through without fail.
The first part of an effective debt elimination strategy is the cutting down on unnecessary expenses. This requires a lot of discipline from you. If there is a family or partner involved, communicate the need to reduce these expenses from your budget.
The second part involves activities that increase the money in your bank or pocket. Selling household items, getting a better or extra job or even asking for a raise in your current job. All these require you to be focused and committed to creating a financially stable future for you and your family.