No one wants to be in debt yet most people find themselves swimming in it. Borrowing is not bad; however, you need to avoid working to pay off debts. Reducing your personal debt will free up some cash, allowing you to spend money on things that you need.
Here are some steps that will come in handy for reducing personal debt:
Look at all the borrowing options that are available to you. If you owe a little money on your credit card, it would be better to get an overdraft and pay it all at once because this could save you from making unnecessary interest payments.
Whom do you owe money? Insurance companies, banks, and building societies can help people who are struggling financially. You should talk to the financial institutions that you owe money and see if they are willing to help you. Your creditors know that once you declare bankruptcy, they will not get the whole amount that you owe them, so they might be willing to negotiate a deal with you.
Bills such as water and power can be paid easily online. Moreover, some companies will reduce your monthly bill if you decide to pay online. Some companies will even give you a discount for paying right away instead of doing so in installments.
You should not use credit cards to pay everyday expenses such as utility bills and groceries. Credit cards should only be used for emergencies; otherwise, you might be tempted to misuse them.
You need to know the exact amount that you owe and the interest you are expected to pay on it. This is especially true if you own a ‘white label’ card that was marketed by one company but operated by a different one. If you already have a loan or credit card with a specific company, the company is not likely to allow you to take out another loan to consolidate your debts.
Once you add up all your debt, you should think about how to consolidate private and federal student loans. When you know how much you owe, it will be much easier to work out how much you can afford to repay.
Are your debts restricted to one or two credit cards that incur interest? The cheapest option would be to transfer your balances to a zero-interest card. You will be given a limited interest-free period to clear your debts, after which the interest will revert to a 17.9 percent APR.
If your debts are too much to be moved to one credit card account, you have other options. You can either move as much as possible to zero-interest cards or apply for a personal loan that will cover the whole debt. If you decide to move your debt to a zero-interest credit card, you can pay the minimum allowed and focus on paying off the more expensive debt that you owe.
Choosing a personal loan that covers all your debt is more expensive, but at least the payments are fixed. Therefore, you can be sure that your debt will be paid off after a fixed period.
Is your current account always in overdraft? If it is, you need to ensure that you are not paying over the odds. Some banks allow existing customers to transfer current overdrafts to the new account. However, you will need to undergo an affordability assessment before this can happen.