Debts could become a reason for unnecessary stress. Not only it may impair your relationship with other people; it may also lead to serious health problems. Therefore, it is important that you do not let any of your debts be out of your control or the interests and fees will start dragging your finances down only in a few months. For most people, a debt consolidation loan is the answer to avoid all getting drowned in penalties.
But just in case you’re starting to go down the debt spiral, here are some tips to help you escape the financial black hole.
Manage your cash flow
Income should always be higher than expenses. Cut memberships that aren’t of significant use like gym and restaurant memberships. Stop or downgrade TV subscriptions including other unnecessary expenses you have.
From the financial inventory you have created, identify the items that can be sold immediately. Perhaps, a big-ticket item can cover the majority, if not the total amount of your debts. It will also lower down the loan amount you need for consolidating your debts.
Do a financial inventory
Know where you stand as far as finances are concerned. Jot down all assets and liabilities under your name. Similarly, lay out your total monthly income as well as expenses.
Apply for a possible debt amnesty
Ask each creditor for amnesty. Let them know that you are no longer able to pay the originally agreed amount then negotiate to pay for a lower and fixed amount instead. The goal of a debt amnesty is to prevent the loan from accumulating higher interests, penalties, and other fees.
Look for and transfer any balance to a loan with lower interest rates
If most of your debts are those from your credit card usage, consider transferring them all into just one card. But make sure that you choose the one with the lowest interest rate.
Paying off debts is not as simple as others may think. It’s an emotional and intellectual battle that needs undivided attention and resilience.