We take out debts for various reasons. It can be for medical reasons, for home improvement, for purchasing a home or buying a car. But taking out a mortgage or a loan is the not the end all. You will have to take steps to pay off your debts. If you are unable to pay off your debts, things will get difficult for you in the long run. Also, it will have a negative impact on your credit and financial situation. Moreover, unsecured debts like credit cards and payday personal loans have high interest rates. Non-payment of such debts can lead to severe increase in the debt amounts.
Steps to Reduce Debts
Here are some of the steps which will help you in paying off or reducing your debts to a great extent and help you bring back your finances on track. Let’s take a look:
- Add up your debts: In order to reduce your debts, the most important thing that you need to do is to know how much you owe to your creditors and lenders. You should also calculate how much interest you are paying. This will give you an idea as to how much money you need to pay off all your debts. You should also work out as to how much amount you can afford to pay toward those debts.
- Transfer your debts to a zero interest card: Your credit cards and other personal debts may have a high interest rate. This makes the payment difficult. In such a situation, it will be better if you take hold of a zero interest card and transfer all your debts to it. Thereby, you will not be responsible for paying any interest payments. You will only have to pay the principal amount. However, you should make sure that you make the payments ASAP or else when the introductory offer ends, the interest rates on these cards will be quite high.
- Consolidate your debts: You can take out a personal loan in order to consolidate your debts. Once you pay off all your debts, you will only be responsible for paying the unsecured personal loan. Thus, you will have to make one monthly payment. Thus, you will not have to remember several payment dates. But in order to get a personal loan with good interest rate, you should have a good income and credit score.
- Create a budget: In order to reduce your debts, you should make sure that you have good amount of money in your hands. For that, you need to save money. Unless you draft a budget for yourself and follow it diligently, you will never be able to save money. Track your expenses for the first few months and then draft a budget depending upon that. You should review your budget quarterly and make necessary changes as and when required.
- Seek advice from a free debt counselling service: When you are desperate to get rid of your debt problems, you can take help of debt counselling service. They will work with you and let you know how you should manage your debts in order to get rid of them. They will help you in formulating a budget. Also, they will help you negotiate with your creditors to sort out your debt problems.
Hope the above mentioned steps will help you reduce your debts.