Getting into debt is very easy. And if you are reading this, you probably know that getting out of it: not so much. We all tend to be impulsive at times and just take on loans we have no idea how to pay. Or in more serious cases, maybe your income source just died and you simply don’t have a way to pay out everything that started mounding up. Loans can be very punishing and it isn’t that odd to fall into its trap every now and then.
But if you have an actual problem of getting into them again and again, this article might help. We have listed out fairly simple, but often overlooked ways of dealing with debt.
Increase monthly installments
The thing with loans, especially those that are compounded, is that they increase exponentially. The more of the principal you leave untended, the more your interest becomes, and ultimately the more you will have to pay (Here’s a video explaining this). Increasing your monthly payments can help reduce the incidence of this on your bank account.
Don’t be afraid to drastically cut down on expenses for a few months, you will definitely be rewarded in the long run. In the end, no one wants to pay debts forever.
Save more money
This one might sound weird. Why save money and put it in a bank when you can use that money to pay debts right? Well, it’s tricky. You see, people who have a debt crisis usually tend to take on more and more of it. Sounds stupid, but its a lot more common than your think.
If you instead invest that amount towards an emergency fund, you will see that in the long run, you will borrow less and use more of your own money. When the need is, instead of succumbing to that sudden urge to borrow, you will just take money out of your bank account. Plus, savings account generates interest, as little as it may be, so its a good idea anyway.
Negotiate with your creditor
There’s a common misconception that an agreed interest rate is set in stone. Well, to an extent it is, but not if you can convince your creditor otherwise. If you have previously paid your debts on time and have a good record, negotiation is especially relevant. As I explained already, the more interest your principal has the more it compounds and you are trapped forever.
But if you can just convince your lender to lower the interest rate, even if only by a little, you will reap benefits in the long run.
Ask for a settlement
This one is a bit tricky too so bear with me. You see, when you are in a lot of debt, a lot more than you could ever pay, you might actually be in advantage. Your lender, thinking that they will never get their money back, might agree to settle for a lesser, one-time amount.
This option is relevant if you have a very huge amount of debt and no foreseeable way of paying it. You can negotiate with your lender and explain your condition, pay a lesser amount, and be done with it. Obviously, this requires a lot of sympathy and insecurity on the lender’s part, but it might just work, who knows.
The major reason people fall into the debt trap is actually that they never stop taking on more. The more you borrow, the more you will want to borrow. You just won’t ever stop and you will be trapped for life. Avoiding this is obviously a prerequisite step to clear out your debts.
Learning self-control is therefore essential. You might want to find ways that will help you control yourself. One of them could be saving, maybe take on the 52-week savings challenge, or just cutting out on expenses and live low for some time. Maybe create a personal budget to help you get a sense of how you should spend. In any case, you need to convince yourself that borrowing more is only going to invite more problems. I know its very obvious but as I said earlier, taking on more and more debt is much more common than you think.