Debts may not be devastating. But they can pretty much be disruptive to the point where we get annoyed with them. The situation can get even more complex if you suffer from multiple debts. To solve this issue, you need an effective debt repayment plan.
When many debts exist over long repayment periods, it is likely that you don’t get to access opportunities for saving money. The debts might also keep you stressed, compromising your focus on the other important matters of life.
Is there no way to solve this issue? Yes, there is. Organising your finances, learning about different debts, and setting up an effective debt repayment plan will help you get rid of this issue faster.
Types of Debts You May Want to Know Before Making a Debt Repayment Plan
Debts are of varied kinds due to the conditions they associate with. We need to learn more about them to understand how they work. You may not repay every debt in the same way. This is why the following table may help you.
| Unsecured debt is the most common type of debt. They don’t come with the need for an asset as collateral. They might be a little high on interest rates. Overdrafts, unsecured loans, credit cards, payday loans, and many more fall under this category. | A Secured debt, on the other hand, works like the opposite of unsecured debts. Secured debts will involve collateral or an asset. The interest rate is significantly low. Mortgages; some versions of car loans and many more fall under this category. |
| Problem debt is the debt you cannot manage to repay. In colloquial terms, the condition this debt creates is referred to as you suffering from debt ‘over your head’. What it means is the money you owe to your creditors as debt repayment is higher than what you earn. | A managed debt is more of a relaxed form of debt. You can make repayments comfortably using your income, which indicates you earn more than the loan instalment amounts. It may also refer to the kind of debt you can take care of without looking for additional help. |
With that being said, you may likely be suffering from one of these debts. Well, you need to repay them soon. Read the next point to learn about this repayment and how to make it effective enough.
A Step–by–Step Guide to Repaying Your Debts
Now you know what kind of debts are and which one you may be suffering at the moment. Of course, you have your specific debt repayment goals and debt conditions. So, go through the points mentioned below, but always evaluate your conditions to select the most suitable options.
- Assess Your Debts
The first thing that you need to do to understand your debts is to assess them. You may have more than one debt option. Go ahead and note down the amounts you owe your creditors. Find yourself a loan calculator and calculate the amounts carefully.
Ensure all the amounts are separately noted down and recorded after each instalment. This includes the loan amount (the full amount), the outstanding loan amount, the interest rate and the monthly/ weekly instalment amounts. It will help you to understand the payments and make them effective.
- Consider Repaying Methods
There are many ways to repay a debt. Obviously, you are going to choose a way as per your earnings. But it is also true that repaying them needs to be done faster.
- In this regard, you may use the snowballing method. As simple as it sounds, a snowball of smaller size rolled down a slope will gradually become larger as it rolls down and collects more snow. Similarly, you can start repaying your debts with the smallest amount to stay on the comfortable side. But then you may increase your loan repayment amounts, and you will see how easily you come to the end of the terms.
- Now, if you have good finances at the moment (for instance, you have a managed debt scenario), then you may easily use something called the avalanche method. Again, as its name suggests, the avalanche method means paying the debts in the highest amount and then gradually reducing the amounts to a comfortable level.
- Another good way to repay debt is to take the help of a personal loan. Yes, you may even repay a secured debt option using these sorts of loans. If you suffer financial issues such as poor credit or low income, then you can still get simple and hassle-free debt consolidation loans in the UK with no guarantor. A direct lender organization can help you with these sorts of loans.
Learn about these ways. Speak with a financial advisor in person or online to find an effective way to manage the particular debts you are suffering from. You may also speak with a direct lender if you choose the last option of the three.
- Don’t Delay Repayments and Repay Them in Advance
This is something we all know. But having limited access to finance or suffering from serious financial complications can sometimes make us miss loan repayments.
As a matter of fact, loan interest rates are not going to stay constant if the repayment is not made at the right time. They tend to increase with late payments. Plus, if you have more than one loan, then chances are you are going to get charged even more money only for multiple interest rates.
It is also confusing to manage more than one debt. It is because you have to pay different amounts of interest and deal with varying durations of repayment simultaneously. A poor credit score can worsen the situation and penalise you with more charges.
This may be why people choose instant cash loans for bad credit from a direct lender in the UK for consolidating multiple debts. These loans take all the other debts into one loan and repay them quickly. Now, you have got one loan repayment amount with one interest rate, which is much easier to understand and repay. Solving those debts faster and repaying your direct lender at the right time can also save you money.
To Conclude: Reduce Costs to Save Money for Debt Repayment
We can say that a debt management process is as simple as ABC when you are conscious of where you are investing your money. Plus, if you make healthy lifestyle choices and make some adjustments to your life to manage saving more money, which you can use for repayments, then the entire deal will be easy for you. So, take your time, think accordingly and solve those debts.
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.
