No one likes to be in debt. But whether you like it or not, in some point in your life you will have to borrow money. For majority, it is not a big deal. Of course, it may take years or decades to pay off a personal or mortgage loan, but that debt will be resolved at some point. Unfortunately, that’s not always the case for an entrepreneur. Starting a business takes a lot of resources – whether it is to pay for research, overhead costs or other necessary expenses. It may seem like the bills keeps on adding up which is a very daunting and overwhelming experience that can affect your life. If you plan and accept useful advice, you could have a shot from climbing out of business debt. Here are a few you can follow as a guide:
- Get a clear view of your debt landscape
Create some kind of spreadsheet and document all your sources of debt such as creditors, remaining balances, interest rates and minimum payment requirements. You want it all summarized in one place so you know exactly what you have to deal with.
- Reach out to lenders and creditors to negotiate better terms
Analyse and identify which debts weighs the most, and try to talk to the ones you owe to see if you can set up a new payment plan that is a financially lesser burden to you. If your credit score has improved since you took on debt, you should look into refinancing your other loans like mortgage or car loans to possibly lower your interest rate.
- Find ways for debt consolidation
In addition to refinancing, explore other options of consolidating some of your existing debts into a new monthly payment with lower interest rates either through personal loan or a balance transfer card. This could save you cash on interest and make repayment easier.
- Prioritise your debts and pick a pay-off approach
If consolidation isn’t right for you, decide on the order in which you’re going to knock off your separate debts. You never want to default on any of your minimums – especially when it comes to secured debt, where you could lose and asset but you do ideally want to pay a little extra towards one balance at a time to eliminate each systematically. Usually, you should prioritize clearing off debts that weighs the most in interest (e.g., credit card bills). Of course, if you have old debt that might go into collection son, that also needs to be a primary focus.
By following this method, you will clear off your smallest balance first and then the bigger ones, while disregarding interest rates. As you clear off the smaller debts, you’ll free up your cash to pay for others. The good thing about this is you can see your debts are clearing off quickly which can keep you motivated. Just one downside is that you could end up paying more overall in interest.
This method lets you clear off your higher-interest-rate debts first. You will organize your debts in order of interest charged, and start with the highest, moving down the list as you check them off. Although it takes time to see results, but you’ll save money you can divert back into other payments.
- Set up automatic payments and regular reminders
If you set up automatic payments for all of your debts, it helps you to pay them off on time, in full, every month without you having to realise or worry about it and you can avoid penalties and fees. Or, you can use the reminder app on your phone to alert you on upcoming payments so you will be able to monitor your balance.
- Establish an emergency fund
Follow the steps above closely, it will be very satisfying when you can watch your debts managed well. However, while you’re focusing on repayment, you have to establish measures to avoid falling back into debt if something unexpected happens. As soon as you can, you should divert some extra cash into emergency funds so that you are able to draw on this reserve – rather than your credit card if times get tough.
And if you require any professional advice from financial experts, you can always come to Finsource Credit where our doors are open 24/7. Finsource Credit also offers up to three types of loans that suit your needs, such as clean loans, property loans, 2 in 1 financing. For more information, call us today to learn more about our services.
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