Last Updated on October 8, 2021 by MoneyVisual
It is not unusual to find yourself in a tough financial situation that leads to debts. Now, the difference between a debt turning sour and being on the right side of credit will all depend on how you manage it.
All in all, you don’t want your debts to balloons and get out of control. So, how do you cut or eliminate those debts giving you a headache? Well, this article covers some top strategies on how to cut and eliminate your debt like never before. Let’s get started.
Calculate Your Debt
If you know how much you owe your lender, then it gives you a clear picture of where you are in the debt payment journey. You will get an idea of the level of effort needed to initiate effective debt payment. Well, start by creating a list of debts alongside their respective debtors, total debt, interest rate, due dates, and monthly payments.
Also, update your debt list accordingly to keep on track with your latest payments and balance. With quantified information about your income and debt, go ahead and calculate the Debt to Income ratio to understand how much of your income is being used to service your debt.
You can also leverage debt reduction software to make the entire debt calculation process easier. You may check out debt payoff calculator to calculate your debt repayments.
Negotiate for Lower Interest Rate
Most debtors fear asking respective creditors for lower interest rates. Quite often, we have a mental picture of that hardliner creditor image. Do not shy away because many debtors negotiate with their lenders for lower interest rates especially where the interest rate is high.
Of course, the lender will consider a number of factors before giving a green light or turning down your request. However, being in their good books will largely turn their decision in your favor. For example, if you are known to clear your debts on time or simply discipline with your payments, the creditor would likely listen to your plea.
Consider Taking a Loan
While a loan is another type of debt, do not overlook it because it can massively help you avert penalties or charges due to late payments. If you cannot raise monthly payments on time and don’t want more penalties and charges, perhaps taking an emergency loan will help fix the issue in the short term.
There are plenty of emergency loans like Car Title Loans where you have your car as collateral. You can also for another loan to refinance another one at better rates that won’t add to the strain of eliminating your debts. Try to negotiate with the creditor and find a loan option that is better for you.
Pay Your Bills on Time
Late payment attracts a penalty and this will compound your woes. At this point, you don’t want anything that adds more pain to your debt repayment process. If it is avoidable, just try your best to avoid late payments of bills. You can set reminders so that you can know when the deadline approaches. If you happen to miss a payment, it is advisable to follow up and make payments.
If you wait for the next due date, chances are high that the creditor will report you to a credit bureau. Again you will have to fork out some cash to get yourself from the hands of the credit bureau. All these extra charges hamper your repayment plan given you are wasting more money on penalties and interests that could be possibly avoided.
Cut your Budget
While servicing debt slices your income, it is important to check that your budget isn’t eating a large pie. At least trim your budget to remain with more money to service your debt. This can be actualized by cutting the expenses on luxuries or just optional purchases. It is a simple way to help free up more money that can then be channeled to debt payment.
Look for Extra Money
If your debt is huge and might take more time to finish, you should look for more sources of income. You can look for another side hustle job such as seasonal part-time jobs to help add more income to your pot. You can also negotiate with your employer to increase your salary if possible.
Engage a Professional
If debt management looks like a hill to climb and there is no sign of slowing down, then it is advisable to engage a debt professional, financial planner, or a credit counselor. Explain to them about your situation and clear the air on several related matters such as legal obligations.
These professionals would draw you plausible paths to help fix your debt. In an event that repayment hits a snag, you also should consult them before making any legal decision. For example, ask about the implication of declaring yourself bankrupt and whether there is a better option.
Pay at Least the Minimum Amount
Of course, the fastest way to complete debt repayment is by paying more than the minimum amount. However, your financial muscle might not be strong enough to guarantee anything more than the minimum amount. If this is the case, just make sure that you pay at least this minimum amount. It can save you more penalties and keep your account in good standing.
Sell anything you don’t need
You might be having several assets at your disposal and some of them don’t add value to you. In other words, you simply don’t need them! Consider cashing in on these items to help raise more to pay off your debt.
Some assets might fetch you an incredible amount of money that chops off a large portion of your debt. Provided you are ready to sell these items, just pull a plug and raise more money to service your debt.
If you have been struggling to find a way to cut and eliminate your debt, we hope our quick guide has given you some pointers. Remember, the only way to attain financial freedom is to learn to cut and eliminate your debts.