Mounting debts can undermine debtors’ well-being and even derail their general financial status. Debt when not tackled as at when due may hinder your overall growth because it would disqualify you from so many opportunities you would have otherwise enjoyed. It is however not entire wrong to borrow, but the events that follow when you are unable to meet the refunds make the whole process intimidating. There are, however, some debt management strategies that have been crafted by some intelligent individuals and institutions, and these techniques have assisted millions of people in dealing with their small and hefty debts, short-term and long-term debts and so on. But, not all these methods are ideal for everyone. Some are meant for short-term, while some are meant to handle hefty debts. So, in this article, we will intimate you with some debt management strategies, and from them you can easily select the one that is best for you.
Small debts come in the forms of small personal loans, car loans, student loans, and bills. These types of debts are not always overwhelming, especially when the concerned individual still has a source of income.
Strategies for them
If you owe small loans, chances are you already have a source of income you wanted to use in funding the debts upon borrowing. Why not double the source? This will enable you to make a big monthly payment, and whoooah, your debt is gone. You can raise enough by selling some of your dormant items, taking up more hours at your workplace, freelancing, or exploiting the online world. You have a plethora of options to choose from.
Are you a monthly income earner? If so, this may the best strategy for you. You can negotiate with your creditor to allow you make your payments at the end of every month for instance. What you will then do is to activate an autopay plan which deducts the minimum amount you are supposed to pay from your account automatically. This will ensure nothing else is altering your payment focus.
Search for options
There is always one loan scheme better than that of your current creditor. Search for these debt management options and use them to sort your existing debt in a one-time fashion. You can then gradually pay back the new loan in a more comfortable fashion. Chances are this new loan will have lower interest rates and more favorable term.
Regardless of whether you have a small or hefty debt, there is an option that is great for everyone. It is the ultimate debt management solution that is right for you, and it is called IVA. Independent Voluntary Arrangement is a debt management scheme that allows you to renegotiate your debt refund plans with your creditors. It works well in so many cases, and it binds your creditors, legally, to freeze all future interest on your debt. This means that your high-interest rate debt or low-interest rate debt will not increase more than the amount you start the IVA on. In the end, any remaining balance at the end of your IVA period will be cancelled.
Hefty debt doesn’t necessarily have to be a whooping sum; in fact, it could be a collection of different high-interest rate debts.
Strategies for them
When you owe different credit card debts, you may transfer your credit card balance to a different card. The catch here is that, you are transferring your high-interest debts into a card with a lower interest rate – and therefore spend less in interest over time. It is like paying one debt using another, but with a more strategic plan.
If you have home mortgage to sort, car loan to pay for, and other personal loans to handle, this is your best bet. This method lets you bring all of them in one single swoon into a single debt. Another form of this method that works well is the debt consolidation home equity loan or HELOC. This one works well when you have built an equity in your house. The catch here is also similar to that in the balance transfer approach – which is to pay high-interest debts with lower interest rate loan.
This is a method that allows you to lower your monthly debt payment. It works best when you are struggling to keep up with how much you are paying monthly, and you want to reduce it. All you need to do to exploit this option is to search for a better interest rate opportunity. If you owe a credit card debt, for example, you can take out a loan with a lower interest rate, from a company like Credible, to refinance it.