Everyone has had to deal with debt repayment once or twice in life. Unfortunately, debt management doesn’t provide a one-size-fits-all solution; however, it is an essential skill to pay off your loans on time. Whether you have outstanding student loans or medical bills, keeping up with your payments keeps your finances in check.
Debt management is not as simple as it seems, or everyone would have paid off their loans on time. For some, it’s an intimidating task that may require planning and effort throughout their lives to pay off. For others, specific strategies have proven sufficient in the repayment of debt. If you’re struggling to make debt repayments on time, here are seven tips to help you devise a debt management plan.
- Track how much you owe
The key to planning your debt management strategy is to total the amount of money you owe. Start by enlisting all your debts, categorize them by name or type, and mention the creditor, monthly installments, due dates, and interest rate. Once you have documented the essentials, you will know the total amount you owe. Instead of writing it out on paper, you can also use debt management software. You can record all your monthly payments within the software and use built-in timers to assess the outstanding amount.
- Don’t hesitate to ask for help
Even the smallest of loans can become difficult to pay back, especially when you’re not financially stable. To avoid becoming overwhelmed, consider unsecured debt consolidation loans by Nectar or debt settlement. Debt consolidation lets you finance multiple debt repayments by taking out a smaller loan with a low-interest rate. This new loan helps pay off the existing debts and avoid higher interest charges. Debt consolidation also streamlines your payment channels as you pay one lender instead of multiple. Like debt consolidation, debt settlement services ease your worries by negotiating a lower interest rate for your debts. A low-interest-bearing debt is easier to pay off and less burdensome.
- Pay your bills timely
Debt management goes beyond creating fancy lists. An overview of how much you owe to each creditor can give you a good idea of your financial health. But you won’t need those lists if you’re making timely payments. Late payments make it difficult to pay off your loans due to late payment fees and added interest on top of the amount you owe. Create a budget if you’re falling behind on payments or struggling to make ends meet with your limited earnings. A budget ensures you have a set amount for necessities like rent, food, and utilities while keeping some money aside for debt repayment.
- Create a calendar system for payment reminders
Consider using a calendar system – online or paper – to remind yourself of each debt payment. You can set alerts and reminders days before the payment is due to prepare yourself and your wallet mentally. If you fail to make a payment on time, don’t wait until the next payment cycle. Instead, pay it as soon as you can. Delaying debt payments can result in penalties or a notification from the creditor.
- Pay whatever you can
Even with a well-designed budget and calendar system, paying off debt on time can become difficult. It can be difficult to pay on time when you’re struggling financially. Instead of avoiding payment, pay whatever amount you can at each payment cycle. Making small timely payments is better than not paying at all and ending up paying penalties and late payment fees. You’re more likely to progress in debt repayment with small and consistent payments than not paying at all.
- Prioritize paying off high-interest debts
Consider paying off high-interest loans first when planning to pay off debt and scheduling billing cycles. You don’t want to jump into a financial sinkhole by putting off high-interest payments like credit card bills. Thus, it’s better to pay these off first. You can also pay off low-interest-bearing or smaller debts first to clear up your balance for the high-interest ones. However, doing so can be expensive as high-interest debts charge more for delayed payments.
- Create an emergency fund
Consider saving for an emergency fund for unforeseen expenses. An emergency fund ensures you have something to rely on during difficult times. Besides, an emergency fund prevents applying for more loans and going deeper into debt. The key to building an emergency fund is to start with small deposits.
The first step to effectively managing your debt is acknowledging that it’s the need of the hour. You may have wants and desires like getting a new tv or buying the latest smartphone, but paying off your debt should be a priority. Prioritize your financial freedom and stability by paying off outstanding debts on time.