You may not like the D-word, but it reveals all over your credit report. You can synonymise it with overspending, low income, and poor budgeting. However, it could also be due to reasons like expensive monthly payments, like student debt and mortgages. You wish to avoid staring at the credit report every month.
It may tempt you to avoid the bill, but you cannot do it for long. Remaining blindfolded to it will only affect your financial stability. So, if you struggle to find the right strategy to counter debts, read ahead. The blog may help you as it lists the strategies that help pay dues without affecting essential living expenses.
How to pay the dues under serious financial conditions?
Individuals fall into deep debt due to poor budgeting, a drop in income or excessive spending. Lifestyle financial habits play a role in determining the debt clearance timeline. If spending unnecessarily on weekends, it affects critical debt payments. You roll it over up to the next month until it enters the loan default. So, what can you do to avoid circumstances? The following steps are the answers:
- Know your financial situation
Begin by making a list of the pending debts on your credit report. Mention the interest, penalties, and other additional charges on each debt. Precisely, you must prepare the list stating:
- How much do you owe in total?
- What types of credit do you owe?
- What are your credit limits?
- What interest and fees do you pay?
- What is your minimum monthly payment?
- How much do you spend every month?
- How much do you earn every month?
Analysing these aspects would help you understand which debts you should clear first. It will help you with budgeting for the payments.
- Plan the debt clearance
Next, check the debts that affect the home and mental health. It could be credit cards, council tax and unpaid rent. Consider debts with little impact on your finances, like overdrafts or doorstep loans. Check which of the debts you can clear first. It is ideal to consider the snowball debt payment method.
Under this, you repay the high-interest debts first. It should be the strategy, as clearing costly debts improves credit scores quickly. You can even consider debt consolidation loans for bad credit in the UK from a direct lender nearby. It helps you merge multiple high-interest debts into a single payment. It reduces the liabilities towards the interest costs, the monthly instalment amount, and the total payable amount.
Here is a possible initiative you can take to clear common debts:
| Type of debt | The best way to pay it quickly |
| Payday loan | Make small but affordable payments. |
| Credit card | Transfer balance to a balance transfer credit card. |
| Student loan | Overpayments on student loans help clear the debt quickly. |
| Council tax | Spread out payments into 12 instalments instead of the usual 10. It reduces the monthly liability. |
| Rent | Negotiate with the landlord and pay at least half of the due amount. |
- Work out the repayment budget
Once you have a clear picture of the debts you owe and the best ways to pay each, identify a repayment budget. Whether you want to clear the credit card dues first or the council tax, savings must be there. For this, follow the steps below. It will help you create a budget for repaying the debts comfortably:
- Step 1- know the best ways to pay each debt
- Step 2- Concentrate on small but heavy-interest debts
- Step 3- Set a direct debit for each small debt
- Step 4- Keep your expenses low and eliminate unnecessary spending
- Step 5- concentrate on other debts left after paying the small ones
- Step 6- budget for the least expensive one first, and so on
- Step 7- check improvement in credit score and remaining debts
- Consider a bad credit loan to pay the remaining dues
It may sound counterintuitive, but a bad credit loan may help you manage debt better. If you hunt around, you may spot cheaper interest rates on a personal loan than credit cards. You can determine and consolidate the rest of the dues using the loan. You may get cheap interest rates, APR and terms. It is only if your current financial status is satisfactory.
Bad credit loans grant you the flexibility to achieve your life goals without being restricted by credit issues. You can fetch competitive terms, flexible repayments and personalised assistance to clear the debt. It requires little persistence and continuous payment.
Later, you may get debt-free and rationalise financial freedom hassle-free. Alternatively, you can also check out bad credit loans on guaranteed approval to meet any emergency under strict financial circumstances. You may get it despite poor credit management instantly in your account. However, you must meet the basic affordability criteria to qualify for “guaranteed approval”.
- Watch unique ways to reduce expenses
Yes, you can do a lot more than just cut additional or unnecessary expenses. For example, you can use a free budgeting application to analyse where you spend the most money monthly. Try to cut and reduce such expenses.
Alternatively, check whether the current insurance serves your needs. If not, switch the cover and the provider. It prevents you from auto-renewal and paying the premium automatically. You can instead use the sum to clear some of your heavy debts, like credit cards, home renovation, holiday loans, etc.
You can also check in with your mortgage provider. Identify whether you can refinance or switch to an interest-only mortgage. Some companies may also offer a temporary pause in payments. However, check the interest rate impact of doing so.
It will also help you save money towards essential debt clearance. Alternatively, if approaching the end, negotiate the repayable amount with the provider. He may reduce it if you are under a serious financial condition. Alternatively, check the ways to cut expenses and save monetarily in another way:
- Check whether you qualify for the council tax deduction
- Identify the possibilities of a pay rise
- Analyse the prospect of earning an extra income
- Check whether you are eligible for a tax rebate
- Identify the aspects of renting out a spare room in your home (if possible)
Bottom line
So, how do you feel about debts now? Yes, you can clear it easily by following these expert tips. It is all about acknowledging the debts and understanding the current financial situation and income. It helps you plan a budget and clear the pending dues one by one. You can begin with small debts initially to keep up the payment momentum. Alternatively, negotiate the payments on high instalment debts like mortgage, council tax and rent. It reduces the liabilities drastically.
Jessica Rodz is the Senior Content Writer at Cashfacts. She has a long career in the field of content writing and editing. Jessica has the expertise in the UK lending marketplace where she has worked with 7 different lending organisations and acquired many responsibilities from preparing loan deals and writing blogs for their websites.
At Cashfacts, Jessica is managing a team of experienced loan experts and doing a major contribution in guiding the loan seekers via well-researched blogs. She has done graduation in Business (Finance) and now currently doing research papers on the UK financial sector.
