Completely eliminating our debts is not an easy task and drawing up an amortization process can often be demotivating. However, it is possible to improve your financial situation. To meet this challenge, you’ll need some time and the set of tips that follow.
Create a plan to pay off your debts
In order to reduce your debts, start by listing them. It should include your home and car credit, credit or personal cards, among others. Also point out the installment and the interest rate associated with each of them. This can help you to define an effective plan, with a view to a quick amortization and, at the same time, allow you to stay motivated throughout the process.There are two ways to pay off your debts. You can start by focusing on the loan with the highest interest rate, reducing the interest you pay each month. However, this plan may not be the best one for you, especially if you find it difficult to stay motivated until you see some results. Alternatively, can choose to amortize the debt of lesser value. Thus, you can see the result of your effort more quickly, although you may, in practice, pay more interest in the long term. you do not have the capacity to deal with all your debtsdue to low yields, choose to make a minimum payment monthly. Although it pays more in the long run, it will reduce the risk of going into default. Also read: Want to eliminate your debts? Know the mistakes you shouldn’t makeIf you are really determined to eliminate your charges in 2023, then one of the fastest ways is take on extra work and, with these additional incomes, pay off their debts. It’s important to save as much as possible, but there is a limit to saving that you shouldn’t exceed, so as not to harm certain areas of life. In addition to extra work allowing you to achieve your main goal, reducing your debts, there are other advantages. By having a part-time job, combining your full-time job, You can acquire new skills or improve the ones you already have., meeting new people and different realities. This knowledge can take you to other levels, namely a job with better pay or conditions. Even so, ensure that extra work does not negatively impact your full-time job. Both in terms of time and motivation. Also read: Inheriting debts and assets: Know what passes or does not pass to those who inherit
Renegotiate your credits and consider consolidating your debts
One of the most effective solutions to reduce the weight of your charges is consolidate your credits. In practice, by joining all your credits into one, it allows you to have a monthly installment, lower than the payment of several installments with different interest rates. Although the benefit is lower, it should be noted that at the end of the term you will pay more for your credits, as the deadline is extended to help you not default. Also bear in mind that, to consolidate your credits, must pay your installments on time, in addition to having to fulfill other conditions. Namely, having a guarantor or giving some guarantee to the bank, and ensuring that you are employed. Otherwise, your application may be rejected, as this constitutes a high risk for the bank. Another solution to facilitate the payment of your debts is to renegotiate your credits. This includes extending the payment period, reducing the spread associated with your loans, among other possibilities. If you are at risk of not meeting your obligations, you should consider one of these solutions and find out from your bank as soon as possible. After entering into default, it becomes more difficult to negotiate its conditions, in addition to which, in the case of consolidation, it is an impediment to have installments in arrears.
Read more: Do you have credit card debt? 7 tips to regain stability
Use your savings to eliminate debt
Managing your budget in order to save a certain amount is a good practice that not only helps you save money to buy what you want, but also to have a working capital in case of emergency. Therefore, if you have available savings that can help you pay off your expenses and, therefore, reduce the financial pressure every month, you should consider this option. However, even if your savings can help your financial situation, do use only an amount you are comfortable with. Having the necessary liquidity to deal with unforeseen circumstances is as important as settling your debts as quickly as possible. Therefore, always analyze the cost-benefit of this decision. Also read: Reduce your debts? The solution may lie in consolidated credit
Eliminate unnecessary expenses from your budget
In practice, there are two ways to reduce your debts: either save more money every month, or choose to increase your income. As it is not always easy to find a part-time job (little time available, for example) there is the possibility of adjusting your monthly budget. list all your expenses, organizing them into categories. These categories include food, credits, entertainment, and more. Once you’ve organized your expenses, identify which ones can be reduced and which ones you can eliminate altogether. Then adjust your budget so that you maximize your savings, and the money left over should be used for Pay off your debts periodically. Also read: 5 ways to have more liquidity to pay off your debts
Renegotiate contracts and reduce taxes
As previously mentioned, reducing your expenses is essential to succeed in paying off your loans. Nonetheless, cutting something out completely is not always possible. For example, electricity and water are essential expenses. Therefore, the most you can do is reduce these charges, negotiating all contracts. This includes electricity, internet, insurance, bank fees and other major household expenses. In addition to these contracts that must be renegotiated every year, there are also other ways to reduce your expenses, although this is not always possible. For example, the reassessment of the IMI, although you should first analyze and find out if the conditions for the VPT (Tax Asset Value) to be reduced are met. There is also the possibility, especially if you are self-employed, of reducing your IRS by consulting an accountant. Also read: The best savings is to end debt