When unemployed, you might need to take out a loan in order to make ends…
Smart financial moves to make when in debt
When you are in debt, you probably wish to shut off your eyes and make it all disappear. And while that would be appealing, you need to do a lot more. Budgeting is a good strategy. However, it will only take you so far, especially if you have suffered major financial setbacks. If you are finding it hard to pay your debts, or worried you might not be able to clear off your loan, worry not! Here are some smart moves you can take to dig your way out.
Digging your way out of debt is more mental than it is has to do with financial knowledge. That is why this method should be at the top of your list. It involves paying off the debts with lowest balance first, then slowly paying off the other debts in the same order of balances. Remember to do this regardless of the rates. Clearing the smaller debts will create a positive motivating effect that will keep you on track. Use this method when you are able to pay more than your minimum monthly payments, since it will help your credit score improve gradually.
Alternatively, you could use the debt stacking method which is just the opposite of snowballing. It involves starting off with the debt with a higher balance and trickling down in that order. There’s little difference between these two methods, and it is up to you to do your research and choose one that perfectly suits your needs.
Calling your creditors
If you are having trouble clearing off your debts, then call your creditors immediately. Remember, that one call you make can do the trick. So, contact your creditors and explain yourself. Inform them on how you fell behind on payments, and the possible concessions you need to catch up. Most lending companies have hardship programs, and may lower your interest rates or extend the loan period. Do not forget that the company wants you to pay the loan and will therefore be more willing to help.
Debt management: professional help
This method is perfect when you’re deep in debt and cannot even afford the minimum monthly payments. In this case, working with a credit counselling company is a viable option for you. After all, they can manage to get you lower rates. All you need to do is to send a monthly payment to them and they disburse it to your creditors accordingly. Ensure you go for a regulated and legal company with an established reputation of good service since there are many scrupulous companies out there that can sink you deeper in debt. It will be best if you take time to understand the fees and their terms before signing up.
Get a 12-month loan
This is a good alternative when you need to clear off your debt within a short period. A 12 month loaning option take a short time to process and has simple payment terms, so you do not have to miss that deadline and risk your account being closed. You will be required to repay within 12 months so ensure you have a plan beforehand. Remember, this method can help you clear chronic debts. However, getting into debt in order to pay off another debt is risky. Therefore, use this approach only when you have at least one or two debts to clear on the waiting line.