Debt is when the money that you owe on your belongings or a service that you’ve … It is the money that a person (or company) borrows to make large purchases that they’re unable to afford normally ( for e.g. education, buying a home, car, etc) or just to make ends meet during the time of unemployment and then, pay it back in instalments along with interest. Now although this may seem like a quite useful service, it isn’t much when you find yourself drowned into large amounts of it.
A little amount of debt is favourable for you as the interest rate is also very low. But just a little, as regularly making payments to creditors can help you have a great credit card score and proves to be less expensive by lessening interest compared to normal credit cards or other types of loans.
Repaying debt as early as possible is extremely important and even if you show a tiny bit of carelessness or lose slight track of it, you can end up mired in debt. However, even if you do find yourself in large debt, it’s not the end of the world so don’t stress! You can break the debt cycle just by following a few simple steps:
MAKE A BUDGET
The first and foremost step would be cutting down your expenses as much as you can by getting rid of all the “extras” and use the money saved in paying instalments.
REPAY HIGH-INTEREST DEBTS FIRST
Focus on the high-cost debts. Most of the times, its the credit card with a large amount of interest. Try paying off the remaining bill as soon as you can so you can get rid of the unnecessary burden of the high-interest rate that does you no good. However, try your best to not miss any payment on other credit cards that have low-interest rates as this will increase rates on them as well.
SALE OFF UNWANTED ITEMS
We often own many more things than we need. So it’s beneficial to sell them off and use the money to repay more than the minimum amount on your credit cards.
Try to get a side job as well. Part-time jobs increase your monthly income and hence make bigger payments easier for you.
CONTACT YOUR BANK
This is a very helpful point to reduce the amount of interest rate that you are paying on your credit cards. Many a time, banks have a policy that allows slight flexibility in interest rates if the credit card holder really is unable to pay it. So by negotiating, the bank customer service representatives or the manager can help you reduce the interest rate and even help you with a missed payment. If not, they suggest a better payment plan that suits you.
DON’T USE RETIREMENT SAVINGS
It’s very important that you shouldn’t use your retirement savings in paying the instalments or the total balance. As you may find it easier for a moment and end up using all of it towards paying off debt. Try to earn and save more money instead of using savings. Do it ONLY when you’ve got no other option left.
Small steps make a big difference and By following these tips, you’ll be able to make a visibly positive change in your debt cycle and before you even know, you’ll be out of it! However, I suggest not getting into debt more often and if you can wait for a little, wait till you have enough money and then buy whatever you have to.