Debt is one of those serious things that doesn’t go away when you ignore it. In fact, the reality is that it can keep getting worse as interest rates see your debt levels climb or affects your credit rating if you fail to make agreed repayments.
Without the guarantee of a long-lost relative leaving you a surprise inheritance, it’s up to you to repair your financial situation.
To help free yourself from bad debt and achieve your financial goals, try these five tips for debt-free living.
1. Understand the whole situation
Taking the time to add up everything you owe can be confronting but it is the only way to take positive action to clear your debts and make better financial choices for a less stressful future.
Write down every debt you have – including who you owe, how much you owe them, and the interest rate you’re paying on the debt.
With this total figure finally understood, you can work towards a budget that can help you clear it.
2. Look into a debt consolidation loan
Consolidating debt is about rolling different loans into one – with one easy-to-manage repayment, rather than lots of different debits it’s too hard to keep track of.
One clear benefit of debt consolidation means that you are only dealing with one lender – and one interest rate, or at least fewer.
By securing a lower interest rate, making the same repayments you were making across all the different loans at different interest rates will actively clear your debt faster – and that’s a great way to clear your stress too.
If you’re already a home-owner, utilising your mortgage by refinancing can be a wonderful way to manage debt and, with the help of a professional mortgage broker, it’s possible to find a very competitive interest rate and better loan terms.
But, even without an existing home loan, consolidating all your debts into a personal loan can also be a positive choice.
By shopping around for a low-rate loan with no account-keeping fees, you are taking proactive steps to stretch your budget further. Choosing a shorter loan term also gives you the opportunity to pay less interest across the life of your loan.
3. Tighten your Belt
Even once debts are consolidated, working harder to repay the loan is critical.
Creating a budget – and sticking to it – enables you to pay off as much as you can afford each month, to reduce your ongoing interest.
Making additional payments helps you achieve your goal to be debt-free even faster.
4. Talk to your creditors
Anxiety about talking to people you owe money to is real – but you should not let it overwhelm you. Many financial lenders and companies have provisions for financial hardship circumstances and by being honest about your current circumstances and your willingness to find a repayment solution, you may be pleasantly surprised at their response and openness to negotiate. Consolidating debt is not a magic spell that rids you of all your debt worries but with the right planning and strategy, it can help.
5. Learn Better Techniques for Ongoing Money Management
Why did you get into debt originally?
By understanding the habits you had that put you in the position of bad debt, you can make better decisions around how to avoid future bad debt and take steps to avoid past mistakes.
Sticking to a budget and being more mindful of your spending is a critical part of smarter financial management and are better habits to live by – for life.
For more advice about how you can refinance to consolidate old debts, talk to one of our home loan professionals at Lending Specialists today.