4 Effective Ways To Simplify Your Debt Payments

Debt payments are backbreaking, especially if you have multiple debts to pay off. Having control over your finances is quite challenging. Many people create a budget and an emergency cushion and yet they find themselves drowning in bills. Once you have racked up your debt, you cannot flinch from making payments even if your financial circumstances have changed. You can talk to your lender to request them not to go hard on you, but this is not the guarantee.

Debt advice is out there, and surprisingly, a lot of people give a wide berth to it. They treat it like a stigma. The nasty feeling of what others would think about their incompetency in handling finances does not refuse to chase them.

Well, you should not feel ashamed of admitting that you slipped up. Acknowledgement of your mistakes will prompt you to learn new things and make your life better.

Ways to simplify your debt payments

Here are the effective ways to simplify your debt payments:

• Prioritise your debts

You can prioritise your debt by either interest rate or size. It depends on your budget which method you will choose. If you want to save money on interest payments, you should prioritise a debt with a high interest rate first. However, make sure you do not stop making minimum payments on other debts.

It also speeds up debt settlement as it ensures savings money in the long run that you can utilise towards the settlement of other accounts. This method will take time to see progress because you will start with a high-interest debt that could happen to be the largest balance.

Another method is choosing loans that carry the smallest balance size. You will prioritise your smallest debt while keeping up with a minimum payment on other debts. This method is particularly ideal if you need motivation and you do not have a larger debt with high interest rates. Otherwise, it will cost you a lot more money.

• Consolidate

Consolidating is also an option to pay off your debts faster. You can take out an unsecured debt consolidation loan from a direct lender equivalent to the amount of your existing debts. You will use the borrowed sum to pay off your current debts once and for all. Then, you will be responsible for making payments of an unsecured loan only. The monthly instalment will be fixed, so you will find it a bit more manageable.

For credit card debt, you can open a balance transfer credit card. It will allow you to pay off the balance within a fixed interest-free period. It is a nice way to get out of your credit card debt without paying hefty interest payments; however, consolidation is approved only when your credit score is stellar.

• Fine-tune your budget

Whatever plan you choose to settle your accounts, you will need to create a budget to help you stay afloat. Look over your income and expenses and see how much your budget allows you to pay down smoothly. Then, figure out ways to trim down your expenses.

At this time, your goal is to clear your debts, and to this end, you will have to cut back on your discretionary expenses. Try to live off a bare-bone budget. It allows you to meet only essential expenses and leaves no scope for inessential ones. A budget planner can help you effectively manage your finances.

Bear in mind that you will have to make changes in your budget as your debt balance starts declining. Do not assume that you will never come across any emergency until you settle the whole of your unpaid debts, so it is vital to create a safety net as well. It will keep you from borrowing more money.

• Negotiate with lenders

Both the avalanche and snowball method can be nerve-wrecking sometimes. If it is so, you should talk to your lender to negotiate for better interest rates. Your creditors can put you on another repayment plan in case your financial circumstances have changed.

A few lenders may continue to accept minimum payments until you bounce back; however, interest will keep accruing. You should try to pay more than the minimum payment plan so you can save money in interest in the long run.

Lenders may also put you on payment holiday for a month or two. Try to talk to your lender before the payment is due and be honest about your financial circumstances. A debt management company can also help you with negotiation, but you will have to pay fees if you take their services.

What should you do after the debt settlement?

Here are tips to stay on top of your finances once you have fully paid off your debts:

• You should create an emergency cushion. If possible, stick to a bare-bone budget so you can quickly grow your savings. You never know when emergencies will crop up.

• You should automate savings. it will prevent you from dipping into your funds, and you will also be regular with your contribution.

• Think of some creative ways to save money and put that into your savings account. Buy groceries online with free shipping delivery. Take advantage of coupons and discounts that food delivery service companies offer to waive delivery charges.

• Combine errands to save money on fuel. Do not drive for shorter distances. Go by bike. Public transport is a cheaper alternative to commuting to work. Go by train rather than flight to save money.

• Avoid borrowing money for at least a year. Make sure you manage to meet all your expenses from your current income. You can take out unsecured loans for bad credit in any emergency that comes up, and your savings are not enough.

The final word

Debts can be challenging to deal with. It is always suggested to borrow money when you need it and when you are sure about your repaying capacity. If you are struggling with debts, negotiate with lenders, create a working budget, and consolidate and prioritise your debts.