Debt is an essential aspect of the modern life, whether you need to buy a house, car or go abroad for further studies, we all depend on loans for significant changes that affect our lives. Many people feel stressed out by loans and their steep interest rates, in reality; They are the victims of gross mismanagement and strategy. Debt settlement program is a way through which you pay the creditor less than the amount loaned out.
Debt settlement program companies speak with your creditor to waive off the loan a bit. What you need to do is, deposit some money into a new savings bank account and when you have enough lump-sum, the negotiators speak with the creditors and try to give you some respite. This is highly unlikely, and many creditors do not entertain this, so it is advisable to manage your finances then go to debt settlers. A worst case where a debt collector might be helpful is maxed out credit cards.
This article will help you get your debt off your back without breaking a sweat!
Before that let’s have a look at some of the common mistakes made by people with debts.
People do not estimate their monthly earnings and start dreaming of paying off unrealistic amounts which creates stress.
Trying to pay off multiple debts
This mistake is made by people who do not make a priority list of their debts. They try to fend off multiple debts at a time, whereas focusing on one major debt at a time is the solution.
Tips to manage your debt
Reduce your debts by loan consolidation.
If you have a lot of loans to pay off, this technique is perfect for you. In this scheme, you need to take a loan to pay off your outstanding loans. Your multiple loans are considered as a single entity, and you are provided favorable interest rate. In simple words, you pay for all your investments as a single loan.
For efficient usage of this scheme, it is always advisable to consult an expert who will suggest a proper plan of action as per your financial standing.
Make segregation of your debt.
Debt can be categorized in two ways, good debts and bad debts. You need to identify to which you accumulate category of debt.
In simple terms, good debt brings money to you, and bad debt takes money away from you. For better understanding, here is an example,
Let’s say you take a loan for your startup; This is good debt as there is a scope of returns when your business gets profitable. If the returns are greater than interest paid, it’s proved to be a good debt.
Ranking your bad debts.
If by any chance, you have any bad debts, it is important to rank them before thinking of ways to deal with them.
This simple trick can help you identify which loans you need to deal with first and which ones are of lower priority, and can be dealt with later.
As Brian Tracy rightly said, “eat that frog,” which means, deal with the least liked task first. Similarly, eliminate the worst debt first and deal with others later with renewed confidence.
Halt your credit card spending.
Everyone has adopted a bad habit of using their credit cards unnecessarily, hardly aware of the consequences. By using credit cards, you are serving to the possibilities of facing a financial disaster.
Credit cards put you in the habit of constantly spending on credit and depending on them, while you exhaust your monthly salary. It is advisable to avoid credit card usage as much as possible to utilize your funds properly.
Automate your monthly payments.
The most important task to clear your debts is to maintain your monthly payments. Create a plan according to your financial standing, and narrow down to a figure which you will clear off every month.
This way you can achieve your goal within the stipulated period. The best way to avoid missing it is to automate the payment so that the amount is deposited automatically without your direct involvement. This will help you remain disciplined and avoid overspending, which might cause you to miss the payment.
Recognize your debt as a total sum.
Recognize all your loans as a net, and keep track of the total money you need to repay. This way you can take care of the finances and pay off on time. Prepare a proper list of all the debts, including your monthly payments and credit card reports. This will help you to keep a reality check on your debts.
A large number of accumulated debts create a bundle of stress. But if you can have proper control over them, they become easy to embrace. Manage your debts like a pro, with these lifesaving and valuable tips.