Having entered into a “battle” with debts, the most important thing is not to panic and not to despair. The experience of successful people shows that one can get out of the deepest “debt hole” by perseverance and following a few simple rules.
Tip one. Notify Lenders
If once you realized that your salary is not enough to pay all the loans, then you do not need to hide your position from creditors. And even more so – do not try to hide from them at all. It is almost certain that it will not be possible to avoid reckoning, but if you maintain a good relationship with the bank, you have every chance, for example, to restructure the debt – then you can pay the debt longer, and, accordingly, in smaller amounts. In addition, this will reduce the risk that your case will be brought to court – because the bank, by and large, is interested in the return of its money, and not in protracted litigation. And if you demonstrate your willingness to pay, but ask to change the payment schedule, then it is likely that you will be welcomed. Ideally, this option may even save you a good credit history.
To learn how to deal and communicate with collectors , read the article .
Tip two. Pay a little regularly
If the amount of your debt seems overwhelming to you – do not despair and do not stop making payments. Allocate at least 10% of your income on a monthly basis to pay off debt – firstly, so you will gradually approach the goal. And secondly, so you accustom yourself to financial discipline. A very important point is to understand that you will not be able to repay all debts at once, but gradually repaying them, sooner or later you will pay off completely. And in the future, the habit of putting off 10% of each salary will help you to save.
Tip three. Pay more than the minimum payment
Try to deposit more than the minimum regular payment on your loan or credit card each time. You may think that the minimum payment saves you money, but in fact the opposite is true. By depositing more, you will be able to pay off the debt faster, which means that the overpayment on it will be less. In addition, approaching the desired goal will motivate you to further actions.
Tip Four. Pay off first “expensive” loans
If you have several different loans that you cannot repay at the same time, then start repaying them in turn. It would be logical to give preference first to those debts with the highest interest. The faster you repay them, the lower your debt servicing costs will be, the faster you will be able to get even with other, “cheaper” loans. Of course, you should not allow delays in other loans – fines and late fees are not the best helpers in repaying loans. But let’s say, with credit cards, for some time you can be limited only by the minimum payment.
Tip Five. 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 go for small loans. Pay back all the small debts that you can quickly repay, then you will immediately notice how the amount of your loans decreases. And this, in turn, will serve as a good motivation in order to move on to the goal further: after all, if you repaid these debts, you will certainly pay off the rest!
Tip six. Refinance only expensive loans
In some cases, you can take a new loan from the bank to cover old debts. Refinancing can not only reduce the interest rate on your loan, but also increase its term. However, it should be remembered that refinancing is not always beneficial. This procedure itself is not free, you will have to pay commissions and other payments when applying for such a loan. So if the difference in interest rate is not significant – the costs may be even greater than when paying an old loan. Therefore, it is worth refinancing only those loans whose rates are much higher than those offered in the market now.
Tip seven. Manage your finances
Get your finances in order. It may turn out that you spend most of your income on something you could refuse, and spend the money on paying off debt. Record your expenses – this will help to systematize them and identify reserves for savings. Financial advisors argue that the path to financial freedom begins with streamlining personal finances. Make a financial plan – so your expenses become planned and are consistent with your income. And besides, avoid unforeseen expenses, because your first priority is to pay off your debts!
Council of the eighth. Increase your income
If your current income is not enough to pay off all debts – take care of its increase. However, it is worth doing this only after you have heeded the previous advice – after all, irrational expenses can absorb most of your income, and then it makes no sense to increase them – money will not be enough early.
If you have already put things in order in your finances, then think about additional earnings. There are various options: you can just find another job. But if this is not possible, because you spend all your time on the current one, then perhaps you can 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 nine. Sell something unnecessary
Despite the statement of the famous cartoon character Kot Matroskin, you don’t have to buy anything unnecessary first. Some experts advise selling … a TV. After all, it takes away from you the free time that you could spend profitably. In addition, during a crisis, you can surely refuse a second car, or maybe even a first one: you will save on its maintenance, and you can repay the loan with the proceeds.
Tip ten. Do not take new debts
If you are determined to pay off all your debts, then the most important rule that you must adhere to is to never take new loans! Not enough for regular payments – ask the bank to restructure the debt. Not enough for a living – get rid of extra expenses or find extra income. But give up consumer loans and credit cards.