How to Pay off my Debts

If you have a lot of debt, then you may wonder how you will manage to pay them all off. There are things that you can try that should help you and you should be able to manage them. However, it could take a while to do so.

Keep Making Required Payments

It is really important to start by making all of the required payments that you need to. You will find that you will normally have to make a certain amount of payments each month and if you do not keep up with these you will get charged money. You want to avoid this and so it is important to keep up with these. Often these will repay some of the money that you owe anyway and so by just doing this you could end up repaying a lot of your debt. However, it might be the case that you are struggling to do this anyway or that you would like to repay your debts more quickly. There are things that you can do which should be able to help with this.

Try to Earn More

If you want more money to be able to pay off your debts then you may have to try to earn more. If most of your money is already spent on other things, then this will really be the only option available to you, It is therefore a good idea to think about what you might be able to do to get more money Most people will just think of conventional things such as working more hours in your job, trying to get a pay rise or taking on a second job. Although these will work, they are not easy and there might be some options which will be better. For example, you might find that you will be able to sell some things that you own and no longer need and this will help to raise some money. It might be that you will be able to rent out some space in your home, a room to a lodger or an attic for storage space or even a driveway for parking. You might be able to monetise your hobby by selling things that you make. You may be able to find some online work as well. There are lots of different opportunities for making some extra money. Outside of traditional work, the other options may not pay a great deal of money. However, they will pay some and they may be easier and more fun which could help you as you may already find your current job pretty tricky.

Try to Spend Less

It can also be wise to see whether you can cut down on what you are spending. It is something which might be easier for some of us than others, but we should all be able to do something. Firstly, it is wise to make sure that you check that you are not paying more than necessary for things that you are buying. We all buy lots of different things but we do not always check the prices to see whether we can find the items cheaper elsewhere. Therefore, it can be a good idea to give this a try. Look at everything you buy, not just groceries or things that you buy in shops, but also things you pay for by f=direct debit or standing order such as insurance and electricity to see whether you can switch to cheaper alternatives. Doing this might seem like hard work but it is actually a really easy way to save money without having to buy less. However, if you do cut back on some of the things that you buy, you will be able to spend even less money so it is a good idea to think carefully when buying things as to whether you really need those items or not. This will help you to be able to spend less money and then you will have more towards paying off your debts.

Differences Between Good and Bad Debt

Debt can generally be split into good and bad but there can be some confusion as to what the difference is. This is not helped by the fact that some people will try to tell you that all debt is bad whereas others will say there is never any harm in it. It is good to establish the difference so that you are clear with what the principles are and then you can make easier decisions when you are deciding whether to borrow money.

What is Good Debt?

  • Good debt is when you borrow money same day that will help your financial future. For example, if you use a mortgage to buy a home, then you will not have to pay rent once you own the house and the home should increase in value while you are living in it. Another example would be a student loan where you will be using the money to pay for a course that will help you to get a better paid job as a result. So anything where the loan is going to help you to improve your financial situation as a result of what you spend the money on.
  • There may also be emergency situations where the consequences of not borrowing the money could be far worse than the consequences of borrowing. For example, if you cannot pay your rent and could be evicted you may have no other choice but to borrow the money.
  • With good debt you also need to have made sure that you have the right type of loan for what you are borrowing for. So, a loan which will give you the right amount of money and not too much and that will give you good value money. It is important to compare loan types to make sure that you are using the best one. You will also need to compare lenders to make sure that you are not paying too much. There will be quite a difference in prices between lenders and you will need to make sure that you check to see which one will give you the best value for money. Of course, the cheapest will not always be the best, but the most expensive may not be either.

What is Bad Debt?

  • If you borrow money for things that will not help your future financial situation then this will be considered to be bad debt. For example, if you borrow money to buy three televisions for your home, to replace ones you have already that are only a month old. This is an extreme example, but it shows how a bad debt can be a luxury item which it is not really necessary for us to own.
  • You might think you need money for an emergency but make sure that you check. For example, if it is for rent or a bill of some sort, then get in touch with the company you owe money to first and see whether they can help you. They may be able to delay the payment for you or let you pay it a bit late. So, make sure that it really is an emergency situation.
  • If you take the first loan that you come across, without checking out what loans there are, then this is bad. Loans vary a lot and some will be much more suitable to your needs than others. It is well worth finding out about all loan types so that you will be able to pick the one that you know will be the most suitable for you. Also do not rush into a loan until you have compared the lenders – if you do this it could be bad debt. If you rush then you could end up paying more than you need to or not getting good value for money, perhaps because you will not choose a lender that properly suits your needs.