Debt Management Made Easy: 6 Simple Hacks You Need to Know

If you struggle with debt payments and want to manage better, read ahead. The blog lists the best tips to do so without worries.

Debt Management Made Easy: 6 Simple Hacks You Need to Know

One feels almost financially exhausted after Christmas and New Year. It is hard to check your credit report only to notice multiple debts. The first thought that strikes individuals is – how will I pay the dues? It is natural to panic seeing the debts. However, the best way to manage debts should be there. It helps you know your finances better.

Moreover, you can decide which bills you should settle first. You don’t always need to hire a debt management company. It is not always important to hire experts. You just need some basic knowledge to manage debts better.

How to manage the debts without losing financial stability?

Settling debts timely is important for long-term stability. It helps achieve your lifestyle goals, like buying a car and home. There are two main ways to repay the debts. These are snowball and debt avalanche methods.

a)     Debt snowball method:

Start by paying as much as possible every month on the loan or credit card. You can make minimum payments if you struggle to pay the lump sum. After paying one debt, pay off the next one, and this continues. You can begin with the lowest amount of debt first.

b)    Debt Avalanche method:

It is one of the methods to save money on interest. You make minimal payments on each debt. Secondly, the remaining balance can be used to pay the debts with high interest rates.

You can use any of these two methods to repay the dues without worries.  Here are other ways to counter your debts the best way:

1)     Save for the current month’s payment first

Don’t dwell on previous pending payments. Instead, check your current liabilities to tackle. It could be rent payments, groceries, energy and water bill payments, etc. Budget for this expense first. It will help you avoid debt rollover or attract penalties. 

It is better to set direct debits for the critical payments. It promotes automatic payment cuts even if you forget. You can also inform your creditors to confirm the payments for the month. It will help you miss out on any.

Ultimately, your bank account may feel light. Now, you can use the remaining amount for other requirements. Either save some towards previous debts or use it for future use.

However, keep some for critical emergencies. Most individuals fall back on having emergency cash. Under such circumstances, getting help is challenging. Moreover, poor credit history prevents you from getting instant help.

Don’t worry, you can still borrow money with a bad credit score from a direct lender nearby. You must have proof of valid affordability or employment. Individuals with lengthy working experience get better rates.  Check your credit report, personal ID, and other required documents before seeking one. It helps you get the loan instantly.

2)     Refinance or Consolidate high-interest debts

Choosing when to refinance or consolidate debts is helpful. It prevents you from losing the money that you can earn from interest rates. Yes, both terms work almost similarly. However, a fine line differentiates both aspects. Here is what each term means:

       i.          Refinancing debts

One usually considers refinancing when the interest rates fall. Most individuals refinance to a new loan, generally on mortgages. It helps you get a new agreement with lower interest rates and total payments. It helps you save money on interest rates and the loan. You can consider it if the new interest rate falls by 1-5%. Moreover, consider it only if you still have around 1-2 years of repayment on the loan. Otherwise, it would not be beneficial.

     ii.          Consolidating debts

Unlike refinancing, where you re-finance just one loan, debt consolidation works differently. It helps you consolidate or merge multiple debts into a single monthly payment. This means you pay only one loan provider instead of multiple creditors. It is ideal if you have 7-8 debts and struggle to repay monthly on each loan. Consolidation also reduces the overall amount and interest to pay. All in all, it makes settling debt easy and affordable for you.

3)     Avoid accumulating new debt

You should be aware of this aspect while managing debts. You can never get rid of liabilities if you keep adding new debt to the fore. Instead, practice financial discipline. Try to increase your bottom-line savings. You can increase it by improving your earning source. It could be a part-time income, a hike, or a promotion within the current company.

 You can also use some from passive earnings like investments to provide one as legal income.  It may help you avoid taking on new debt like a fresh credit card. Instead, you may use the savings to fund that. However, some life moments require a lump sum to counter the need. It could be anything like financing a surgery cost.

It thus requires you to provide a hefty sum as a bill. Moreover, constant consultation, medications, etc., add up to the cost.  If you need over £25000, contact hard money lenders in the UK marketplace. The term hard money is used for secured assets. It will help you get the money against an asset. It could be your property, belongings, car, etc. It may help you get a higher sum without worries.

4)     Know good and bad debts

Yes, your credit report reveals you do have good and bad debts. Most individuals end up paying all the good debts unknowingly. You may be happy about settling long-term and heavy debts. However, it brings down your credit history. You had a lengthy one before paying the dues. Now, it fell to almost nothing. As a result, your credit score may also fall temporarily.  

A bad debt is not essential for living. It could be credit cards, overdrafts, or investing in luxury items that you hardly need. Good debt implies the liabilities that you must meet to improve your future lifestyle. It could be a car loan, mortgage, or student loan.

You can balance this aspect by taking a loan mostly to appreciate items. It could be buying a home or renovating the property. Avoid using one for depreciating items like- clothes or retail goods. It helps you improve the count of good debts. However, you still must repay this one to grow.

Determine how much you can pay according to your current financial situation. Check whether you can negotiate interest costs or the total repayment amount. It automatically reduces the monthly instalments.

Bottom line

If you want to manage the debt better, the blog may help. It lists the strategies that may be ideal for an average to handsome pay. You can consolidate the dues, pay the highest interest debt first, or avoid a new debt. Things like these help you optimise the finances and pay the dues systematically.

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