Here’s the truth. If you have a large debt or you have several small debts, it will take time if you cannot access a lump sum to pay off everyone. The good news though is that most lenders are willing to negotiate for a payment scheme that you can afford provided you are willing to sign a promissory note on the new agreement. With debt, the bottom line is to face the problem head-on and try to work with your budget and the lender on ways to pay it off. Running away from debt will never solve your problem and it will haunt you for the rest of your life.
Most people have a debt they are paying off. It’s part of the financial set-up we created for ourselves with easy payment terms or the need to satisfy an urge to possess an item or service.
Start With Debt Realization
Face your debt by listing down everyone you owe money to. It’s different seeing it on paper and mentally taking note of your debts. This will serve as your wake-up call.
Create a Plan
First, you will need to increase your income and decrease your expenses. It will mean cutting down on the luxuries and unnecessary expenses. You may even have to let go of your post paid plans, the second or third car, and things that do not cover basic needs. If you can dispose of these things and build a fund you can settle some of the debt you owe. The rest has to be negotiated with the lender.
Be realistic when talking to the lender. Do not over commit to a monthly payment you cannot afford. In fact, if your surplus monthly income is $500, commit to paying half and leave the rest for emergencies. If you can find a second source of income that will not affect your health and well-being, you can pay an extra month ahead so you have that luxury in case an emergency arises. You may even be able to renegotiate for paying a lump sum to lower the monthly.
One thing you should never do is apply for a loan to pay a loan. You do not need to complicate your life this way.
Accept That There Will Be Sacrifices To Be Made
The hardest part of paying off your debts is the change in lifestyle. You may have to commute instead of drive to work. You may have to cook instead of eating out. You may have to stop seeing your friends if they party hard and spend a lot every time. There are going to be sacrifices but you can rest in the comfort of knowing that once you pay off your debts, you will be worry-free as long as you start paying in cash. In fact, while you are paying off your debt, avoid using credit.