So you’ve taken a loan but the economic situation is different from when you first got it, hence making paying it off seem impossible. Perhaps you didn’t get the salary raise you hoped for or your investments didn’t pay as much, now you’re stuck in debt as your credit score suffers every day you default. Here are five steps to take that will help you pay off your loans despite your financial situation.
STEP I: CARRY OUT A STOCK CHECK
It’s impossible to fix a problem without acknowledging that one exists, which is why one of the most important elements of any debt-reduction strategy is choosing which debt to tackle first. Sit down at a computer or take out a sheet of paper and write down all of your debts.
Make sure you list the amount, the interest, the term, and your monthly payments, and the available credit limit for each debt, with this you would be able to work with solid numbers when you create a budget.
STEP II: MAKE A ZERO-BUDGET
It is only someone who is yet to get the full scope of their financial situation that is comfortable operating without a budget. “Zero-sum budgeting usually gives you the tools to improve your finances by teaching you how to live off last month’s actual income instead of income projections, make actionable decisions regarding your money, and reduce waste,”
The idea behind zero-sum budgeting is that at the end of the month, you don’t have a single cent leftover because every cent has been allocated to bills, debts, and savings. This may sound a little unsettling, but it will help you regain control much faster.
STEP III: FIND WHERE YOUR MONEY GOES
This might sound funny but oftentimes most people can’t pinpoint where the bulk of their monies go and hence trim their expenses from the wrong places.
Go over your budget and categorize your spending to see where you’re spending too much money and make an expenditure reduction plan. Some ideas include:
STEP IV: MAKE MORE THAN MINIMUM PAYMENTS
So we’ve talked about budgets and spending but now it’s time to get to the nitty-gritty details of debt reduction. The first and among the most important things to realize is making just the minimum payment will make repayment stall.
If you want to get out of debt, you must make higher-than-minimum payments no matter how little the percentage.
STEP V: STAY IN TOUCH WITH YOUR CREDITORS
Believe it or not, creditors are people too, and they do have a sense of sympathy. If you ever find yourself in a situation where you’re in over your head or outright struggling, call your creditors.
Speak with them on their available services to help you best manage your debt.”
In some cases, your creditor may be able to reduce interest on your payments, especially if you can prove that you’ve fallen on financial hardship recently due to things like a job loss or medical emergency.
Being in debt can be panic-inducing and in some cases make you question your goals for the future, worst of all, it can inspire desperation that makes people listen to the wrong people or make poor choices. This is why getting more information on the different kinds of loans available along with their terms even before you take one is important. Keep your eye out for more low-interest loans like Quick Loans, Salary-Based Loans, and Payday Loans on ALAT.
For more information on loans, check our frequently asked questions.