Debts can be life-altering phenomena. It would not take you minutes to get loans from friends or financial institutions, but repaying them on time often becomes a hardship for some. It keeps piling up when left unchecked and then devastates lives even before you can do anything about it. Therefore, debt management or better known as debt mitigation, serves as a crucial life skill that every individual must learn in their lifetime. No matter how hard you try, it is sometimes not possible to avoid borrowing money and incurring debts. The issue, however, is not debts; but to manage the situation by using appropriate techniques, which is what we are going to have a look at in this article.
Clear Off Your Debts One At A Time:
It is easier said than done, but you must at least try to tackle this issue one debt at a time. Now that the damage is done and you are being sucked into a whirlpool of your own creation, there is very little you can do about it but manage the situation. Take up that one debt that has been gnawing at your peace of mind. Deal with that first. Clear one debt with a substantial payment every month, and cater to the others with a minimum amount. This shall alone help you stay afloat, and you might have at least a moment’s respite from all the duress.
Bank On Your Insurance Policy:
You might have some sort of a life insurance policy that comes with cash benefits. Cash out the policy and use the money to pay for your debt. This is not truly a glorious way to be spending money out of your insurance; but when situations seem dire, you might be only left with such an option. Moreover, life insurance policies are supposed to help you when your future looks bleak. Therefore, you need not be guilty about adopting such a measure. It is only going to make your life easier without the tension of debts looming large. Click here to find some more exciting facts about insurance policies that can come real handy when things look bleak.
Consider Building a Contingency Fund:
The motto of a contingency fund is to act as a supporting cushion when you run low on funds. Such situations are almost unavoidable in an individual’s life. If you do not have a back-up or emergency account, then when your finances look awful, you will be left with no other option but to borrow more money.
The process shall continue and sooner than later, you will find yourself in a cycle of debt. Therefore, stay alert and be prepared to ward off such situations if they rear their ugly heads. A contingency fund will not only enable you to draw money to pay off your debts but shall also help you manage any other financial crisis.
Break The Cycle of Debts:
Another extremely important point to consider here-you need to break your habit of applying for multiple loans and credit cards once and for all. There is no end to the craving of transacting in significant figures. However, think of all the trouble that shall come along with it when you become a defaulter. It is not just your own life that is on the brink of annihilation, but also the lives of your son, daughter, parents, husband, wife and anyone who depends on you for financial as well as emotional support. Things might not go according to your plan, and you might not be able to buy that expensive car that you always dreamt of. However, this is no reason to keep on borrowing money at the risk of your entire future. Be wise and responsible if you need to get out of that horrendous debt situation or are trying to avoid falling into one.
Negotiate for a Lower Interest Rate:
Negotiating with your bank for a lower interest rate is entirely plausible if you did not already know about it. Banks might have their self-interests at heart, but they might be willing to settle for a low interest rate if you have been a regular customer with a satisfactory credit score. With a high interest rate, you would be paying money towards that interest rate and not the principal amount. Therefore, think of all the money you would save if the interest rate was lower and the money you spent on repayment went towards the principal amount.
Come To A Settlement:
Coming to a settlement on your debt is the last thing that you can do to manage the situation. Your bank will probably consider this option when you have a high chance of defaulting. Coming to a settlement means agreeing upon a specific amount that you can pay and close the deal once and for all.
Look for Alternate Ways of Income:
Getting your hands on alternate ways of income is not an easy feat. However, it does serve as a brilliant idea to have some extra cash that can be spent towards repaying your debt. This way, you do not have to touch your primary income and affect your budget. Every family has a budget constraint and going beyond that can severely affect lives. Therefore, there is no greater idea than to have alternate ways of income to clear off your debts.
There are innumerable ways to get out of your debt cycle. It might require your time and effort to look for those ways and get them into action. However, it is essential to remember that no matter how tough the going might get, there is always a way out. Start by being responsible and acknowledging that there is a situation that needs mitigation. Denial will not do you any good. Therefore, it is pointless to fabricate a world out of it. The right skills of handling a debt situation can save you from a world of legal harassment, and if you are someone who wants to avoid falling into debts, maybe start with building an emergency fund. The rest can be taken care of!