Indebtedness has become a sorry part and parcel of urban living. There’s student loan debt, house mortgage debt, car mortgage debt, credit card debt, personal loan debt and so many other sinister forms of debt that are slowly taking a drastic toll on people’s lives. Indebtedness is certainly a curse, you may definitely want to know how to live a debt-free life – it does not allow people to work at their optimum best with freedom of mind, it does not allow people to progress in life and it causes so many altercations within the family that we can certainly do without. Debt is a reality, but this reality can be mitigated to some extent if we were to use the various methods for debt management.
This article provides five ways by which you can manage your debts. These are methods that could either lessen your debt or even remove it completely. Implement them if you think there’s no way to go with your debts.
Table of Contents
How to Live a debt-free life
# 1 – Plan a Budget
If you are reeling under debt, you have no idea how much relief a properly planned budget can bring to you. Among other things, a budget gives you a crystal clear idea of what your income is, what your outgoings will be (including the payments of your debt) and what savings and investments you can make. Most people think they can never spare anything more than they are already doing, but planning a budget makes all the difference. And if you have other earning members in the house, you can pool in all the incomes and write off the shared expenses. You will be surprised at how easily you can arrange money for your debt payments by doing this seemingly simple task. What’s more, you will get a healthy amount left over to save and invest also. Make this little effort today – plan out a budget, curtail all the expenses you can do without, and arrange the debt payments. You will be debt-free very soon if you stick with the budget you make.
# 2 – Negotiate with the Lenders
Most indebted people do not know this, but lenders are more willing to negotiate than they think. If you are in a financial low for a couple of months, you can speak with your lenders about your situation and ask them if they could give you a reprieve. If they do that, they might charge their interest, but that’s still better than having to pay those astronomical late payment penalties and the interest in tow. Not just that, lenders can also be talked into for a lower rate of interest. If you are finding it really tough to make your payments and have missed several payments already, then you can approach your lender and ask them to reduce the rate of interest, showing your earnestness to make the repayment. If the lenders are convinced you will really pay, they might accede to your request. Chances are low, but things are possible. Lenders will do anything to recover some of their money from what they think is a lost cause.
# 3 – Consolidate your Loans
This is a new wave that’s quickly gripping the world – loan consolidation. You can consolidate any type of loans, even different types of loans can be clubbed together. What the consolidators will do is, they will negotiate with all your lenders for a reduced rate of interest, and then repay your loan to them. Now, you have to only keep paying the consolidator at that reduced rate of interest. Consolidation makes the repayment cheaper. But it also has the great benefit of having you make only one payment each month, to the consolidator. Instead of the various loan payments, you had to make at staggered times, paying just one amount to the consolidator makes the debt payment much simpler.
# 4 – Refinance your Loans
This is essentially the same as a consolidation, but in this, the loan is really refinanced at a lower rate of interest. Unlike consolidation, refinancing can be done with a single loan also. When you refinance your loan, you are as good as taking a new loan to pay out the original one, but you are getting a lower rate of interest, which makes the repayment simpler.
# 5 – Take an Equity Loan
One interest asset that almost everyone has and which can help to repay all the loans the person possesses is the home equity loan. Home equity is the value of the house that has built up over the years. Most companies will finance you in lieu of your home equity. In fact, you can get a home equity loan to pay off your home mortgage too. Of course, home equities are not applicable if you are living as a renter.
So, here were the five debt management tips that can definitely make your life simpler. If you are submerged in debt, one of these methods can certainly give a new lease to your life.