In a previous article, we discussed about debts in general and the three common classes of debts. Now, one could say that having a debt is such a burden, most especially if it involves a large sum of money or if it involves debts such as syndicated debts that, if one could recall, involves a lot of people not to mention a service charge courtesy of the arranger. Now, when faced with a debt or an already growing one that is, how is one going to tackle such an amount? To some it may look like an impossible feat just by looking at the amount but take to mind that nothing is impossible if you carefully tackle the situation systematically or generally find doorways to pay it all back
There are some ways and tips that could help you get off of a debt. Compiling the ideas of several sources, here are some tips and ways to help those in debt:
Liquidation is a process of converting anything you own, termed as assets, into cash to pay off what you have owed. Many corporations and businesses have used this method when they are submerged into bankruptcy to get out of debt.
Debt snowballing is made popular by a person named Dave Ramsey. This is done by paying first the amounts on due from low-interest cards or small balances then concentrating everything else on your biggest debt until it reaches zero. So when debts increase, the amount of money you can use to pay increases thus “snow balling” your debts. A good way to accomplish this is to list your debts in an ascending order so you can which one you should prioritize first. Another way is to transfer from a higher-interest to a lower-interest in which is found in promotional offers. However, better read the fine print as some banks use low interest in their promotional offers to attract consumers to transferring to them and then suddenly increasing the interest rate after the deal is sealed.
Create a Budget Plan
If you are facing a dilemma of whether to take that loan better have a budget plan to pay off your debts. Budgets can help you get off a debt fast and without that much stress unlike not having a budget plan at all. Also with a budget it can aid you on how to tackle future debts. Also with a budget you are able to identify which items are important and needed and which ones are not necessary for the mean time and should be treated as wants and can be eliminated to minimize expenses. With this you are able to free more money to pay off the necessary bills every month. And when you have found out and segregated everything, list the creditors with their corresponding balances and interest rate. Once you find the largest one and start paying it off first and work your way down. If you would observe this is the complete opposite of debt snowballing. This method is most ideal for credit card.
Shred your credit cards
This was the oddest of all tips found in the net but it seems do-able and practical as well. Credit cards are like cash-on-the-go. You can spend to your heart’s content with it without worrying of a suddenly fat wallet turned thin. Only thing you have to worry about is your credit limit or the amount you have to pay at the end of the month (and remember, with interest). So, what’s the point of doing the suggestions above if you just end up with another debt, right after paying the current one? So, if you want to avoid that kind of scenario, best to throw those plastic into a shredder, or better yet, don’t get a credit card, that way you have less bills to pay.
Pay more than what is the total monthly minimum on your bill
Very much self-explanatory, this one is. This is another practical practice that could help you pay off you debts faster as well as reduce the total interest amount that you are required to pay.
Consider debt consolidation
If those high interest rates are preventing you from paying off the total minimum amount then opt for debt consolidation. This is done as lower interests can help in your payments in which you can pay them off faster without a growing list of payments. This includes switching to a credit line with a lower interest rate.
Pay your debts more often
If it isn’t that much or if you have the cash to spare why don’t you try paying off your debts before your bills arrive or every two weeks? In this way you will be able to pay off your debts faster and save money, effort and time.
Renegotiate with your creditors
So, you have tapped up possible ideas and ways to jump over the mountain of debt that you have accumulated but still find yourself stuck. So what do you do? Let your creditors know about your situation. Try to negotiate a new repayment schedule with a lower interest rate and make sure to tap on their desire to receive payment.
File bankruptcy as your last resort
With everything else exhausted and you still haven’t paid everything and repayment is a long shot; opt for bankruptcy. You can only resort to such when everything seems glum and impossible to repay. But, one should be aware of the drawbacks that go along with it.
Stay away from future debt
A very practical and obvious way to avoid debt is to stay away from it. Face it, the best way to prevent debt is to not get tempted to whip out those credit cards and pay for something you cannot afford or apply for credit cards with high interest amount just because they have awesome perks attached. The best way to avoid in the first place is prevention.