Being steeped in piles of debt can cause you untold stress. Research shows that 50% of Kiwis are affected by the worry about how to settle their bills and the constant struggle to save. Also, stressing over finances can obscure your ability to save, prepare a shopping list to curb your spending, or budget.
But the good news is that it is possible to get yourself out of debt. Doing so has many benefits to your physical and mental health. The income that you free up from debt can mean more financial freedom, better chances to save for the future, and improved morale.
One of the best strategies to claw your way out of debt situations is to avoid high-interest loans. Fortunately, there is an app that all Kiwis can use to get affordable cash. It is called payaid and it’s a means to get a cheap payday advance. Keep reading to learn about other proven ways to keep you out of debt.
1. Face your debts head-on
If previously your strategy for dealing with bills has been tossing them away without opening them, then this is a mistake that you need to get rid of immediately. Remove all your bills and loan statements from wherever you have been throwing them and start adding.
The credit card/loan payments plus all the utility bills represent your base payments. If you find that the total of these exceeds your net income by a big margin, it is time to give your lifestyle a serious look. Some of the options include selling your house and buying a smaller apartment, filing for bankruptcy, or considering getting a second job. The first thing you will need to do is to come up with a plan.
2. Avoid costly loans
Often, we get into debt without knowing it. You may think that the payday loan you are so used to is doing you any good. However, most of these loans are damn expensive. Instead of a payday loan, you could try payaid. It allows you to take out a portion of your salary in advance, just like payday loans. However, it does not attract any interest. You only pay a 5% fee and that’s all. It is a cheaper payday advance loan that does not come with any hidden charges.
3. Make a plan
Do not make the mistake of treating your debts equally. When coming up with your repayment plan, you will need to create a hierarchy among the debts. Experts suggest that you throw all your might behind debts that have high interest rates. Next, prioritize the non-deductible, low-interest obligations. The debts you should pay last are the tax-deductible Owings. And just like we said ditch high-interest debts for payaid.
Also, retain one credit card to help during emergencies and stop carrying the rest. The best scenario is to create an emergency fund and stop using all your credit cards. Developing a cash-only approach will help you stay on track with your repayment plan.
4. Get the Damage Report
At this point, it pays to have a serious look at your credit rating and scrutinize your credit report to see if it has any inaccuracies.
First, view both your credit score and credit report. You can do these for free once every year. But some free credit services have hidden charges. Avoid those that insist that you subscribe to a credit monitoring service. If you forget to cancel it, it will force you to pay monthly charges.
After getting your hands on the report, scrutinize it to ensure it is accurate and mark the accounts that contribute to your poor score. Note that a consumer loan can move from green to red rating by even one late payment. If all your credit accounts have late payments, you could be categorized as a high-risk person, even if you are paying the debts diligently. And since banks have so many people queuing up for loans, they may use this to deny you future credit.
5. Double up Your Efforts
If you can, make twice the payments on the debts that have the highest interests. It may not have the same efficiency as consolidating your debts, however, it speeds up the repayment period. After getting done with the highest-interest obligations, the next thing is to put the same effort towards repayment of the next most expensive debt. Experts call this strategy double-avalanche.
Doubling up on your payments increases the rate that your debts shrink. At the same time, it gets you nearer to the magic number that banks look for before they grant you a consolidation loan. After convincing the bank to give you a consolidation loan, continue with double payments and it will vanish even faster.
6. Renegotiate the Terms
At this time, you can arrange a meeting with your creditors. Before going, make sure you research well and ensure your documents are all in order.
Visit the creditors that you owe. In the case of more debtors, it is advisable to start with the lending institution that you have the most favourable history. Agree on the time of the meeting and make sure you have your damage report at the ready. You will also be helped a great deal by the new all-cash budget. Demonstrate the steps you have put in place to avoid non-payments. After that, ask them to re-look the terms of the loans you have with them.
Proving that you have ditched your loose credit habits will soften your lenders’ hearts, which may make them give you more favourable terms. A debt settling or debt relief firm can also help you in this regard.
Many people that find themselves in mountains of debt have no idea how they got there. But the good news is that ditching your lose credit habits can help you claw yourself out of debts. One thing you may want to do is avoid high-interest loans like ordinary payday loans and credit cards. Instead, payaid gives you a more disciplined approach to borrowing. It enables you to take out a fraction of your monthly income at a zero per cent interest rate. If, for example, you take a payday advance of $100, you will only be charged a 5% fee, which brings the total amount you owe to $105.