If your debts have taken up much of your personal finances and you don’t know how to get out of them, you’ve come to the right place to find solutions.
The first rule is to leave despair behind; the second is to get down to work right away.
Here are five ways or tips for you to start paying off your debts and get rid of that worry as soon as possible.
But first, the third rule: follow exactly the instructions.
Create a budget and stick to it
The creation of a budget is one of the most used ways to get out of debt whatever the amount of them.
A budget is not only about stipulating what and how you are going to spend your salary month by month.
It also includes a thorough analysis of your net monthly income, so you can stipulate on what, how and how much you are going to spend.
Don’t forget to include the dates you receive your salary (biweekly, monthly) and whether there is any other income you can count on (rent, pension).
Once you are clear about this, write down in another section the monthly expenses (house services, mortgage, tuition) that you have to face.
And finally, add a list of all the debts you face.
We recommend that you list them from lowest to highest, including which source they belong to (credit card, personal loan).
Now it’s time to add all of your income and subtract your monthly expenses and debts from that amount.
That way, you’ll know how much you have at the end of the month to start covering your debts and not just your monthly expenses.
Consolidate your debts
If the debts you accumulated were through several credit cards, the best thing you can do is consolidate your debts into a single plastic.
The reason is that, if you continue to make minimum payments, you will never get out of the problem, as this goes to the interest payment and not the actual debt.
When you consolidate your debt in a single institution, it is easier to control the payments and that these occur in time and form, instead of being aware of different account statements and dates of cut and payment.
You also save on several annual fees.
Another advantage is that the interest rate is usually lower once you put them together in a single plastic and the payment fee is reduced, although the time to pay it is longer.
Find out from your bank whether or not you are a candidate to consolidate debts and what the requirements are to carry it out.
Pay the debts from the highest to the lowest
It is about prioritizing which are the most important debts and those that you need to get out yes or yes as soon as possible.
It is common to choose to start with the smaller debt, but this only gives you a false sense of doing something to get out of the pothole.
The most effective action in this case is to attack the debt that is generating more interest and follow that order, until you reach the lowest of them.
It is key that you eliminate as soon as possible debts that have high interest, because the longer you take to do so, the more they increase.
Following this rule, choose the three main debts and think about a certain time to pay them off.
Establish a term to pay
You must not think that you have your whole life to pay your debts: in fact, you do not want to spend the rest of your existence focused only on that.
This is where the precise and disciplined tracking of your budget comes in.
Take another look at the total amount of your debts, monthly income and monthly expenses; according to that, establish a time, with a certain date, to finish paying.
Think time in number of months. Depending on the size of your debt, increase the months to pay it off.
A simple way is to go from 6, 12, 18, 24, 30 to 48 months.
Apply for personal credit
Surely this advice sounds totally counterproductive to you.
What do you mean, apply for a personal loan? If it’s about getting out of debt, don’t increase it!
However, well used, personal credit through a financial institution is an effective way to reduce or pay off any debts you have with a conventional banking institution.
You get rid of the rigid and conventional conditions that banks have.