In times of economic uncertainty, managing debt can be one of the finest ways to make sure of an individual’s financial stability and assist the person in staying on track with their finances.
Inflation might make it harder to pay down the balances. It is totally fair for you to get riled up and stressed at the same time during this period. When it happened to me the first time, I was puzzled, too. But as soon as the confusion clouds cleared out, I mapped out the perfect plan.
While it is always beneficial to consult with a reputed debt management company, here are some of the things that you can consider during this unforeseen situation.
[1] Examination and evaluation of income and debt
When you are paying off debt, taking a look at the money coming in as your income and the debt is vital. Why? Well, it is done so there is better clarity on what you can do and you can’t. When you take a closer and deeper look at the income and fixed expenses, you can see how much funds you will be able to set aside to pay for the debts.
In addition to that, evaluating discretionary spending can also enable you to understand the areas where you may cut back and redirect those funds towards paying off the debt. Having self-discipline and diligence by your side, you may successfully stick to a budget and avoid any kind of unnecessary spending.
[2] Have an attempt to modify the interest rate
Before you make any sudden moves to pay off the debt or fall into despair, consider setting up a meeting with your lender and talk to them. If you are someone with a good repayment history and a long-time lender customer, then there is hardly any reason for your lender to turn down your proposal.
Consider letting your lender know if they can consider lowering the rate of interest. Additionally, you can go with another option, which is to change the monthly due date to match the pay cycle better. Over time, these small changes can lead to a big difference.
[3] Come up with a budget
If there is one thing that I agree with every well-known debt management company, it is the fact that creating a budget is non-negotiable, even when you are looking to pay off your debts during economic uncertainty.
There are various options available online, such as templates, applications for smartphones, and tracking tools that can be invaluable resources for you. Additionally, you may also look for collaboration with a nonprofit credit counsellor. These experts can assist you in creating a budget and identify the areas where you can cut back.
[4] Debt settlement vs debt management
When it comes to the management of debt, there are many options available out there. Two famous approaches are debt management and debt settlement. Debt settlement involves negotiating with the individual who is lending and agreeing on an amount that is less than what is owed and then repaying it. On the other hand, debt management is basically coming up with a plan with a debt management company to pay off your debts.
[5] Wrapping Up
To wrap up, there are generally two debt payment methods that are pretty prevalent. One is regarded as the avalanche procedure, where you consider the debt payments with high interest as the first priority and then think about paying off the small-interest debts.
The other one is known as the snowball method, which is when you pay off the smaller interest debts first and then proceed to pay off the higher ones. Pick your method carefully!
