Paying off debt can be a challenging process, especially if you’re living on a low income. It can even be more frustrating if lenders keep reminding you of your debt obligations. The worst mistake you can make amidst the frustrations is to take another debt to settle the pending one.
So, how do you pay your debt with a low income? Here’s how.
1. Stop Taking a New Debt
Don’t borrow money from another source to settle your current debt. BY doing this, you’ll be doing more harm than good to your credit history.
You’ll end up getting into more debts instead of settling them down. If you keep borrowing, you’ll only be pushing yourself into a debt trap.
2. Supplement Your Income
Find an additional source of income to help pay off your debt. Look for other ways to earn more money to supplement your income and afford your debt payment.
There’re a lot of opportunities out there that can help you maximize your income. Make sure you set aside the extra cash you get from your side hustle to pay off your debts.
3. Prepare a Budget
Create a budget to help you list all your expenses. A budget will help you understand essential tips on how to prioritize your financial necessities. With a budget, you’ll be able to identify your total income and fixed expenses.
Pay close attention to what you usually spend your money on. Is it a necessity or a want? If it’s a luxury, you can consider doing away with it.
Use the money to pay off your debt. If they’re expenses you cannot do away with completely; you can consider cutting down on the amount you spend on them.
4. Understand How Much You Owe
Tally up all the debts you owe as you make minimum monthly payments. You cannot start paying off your debt if you’re unsure of the exact amount you owe. Note that every amount of money you use to pay off debt counts, especially if you have a low income.
Make a list of all your debts, the creditors’ names, the remaining amount of credit, and the interest rates. This will help you to prioritize which debts to pay first as you also protect your credit score.
5. Turn to Debt Consolidation and Other Debt Relief Options
Debt consolidation can come in your aid to help you avoid high-interest rates and manage your debts better. By consolidating your debt, you’re able to pay off your debts by combining them into a single payment at a low-interest rate. It is a very convenient and cost-effective way of paying off your debts.
Additionally, you can turn to debt relief companies. They can suggest creditors who negotiate debt on your behalf. They’re capable of convincing your lenders to decrease the amount of money you owe them.
But before they intervene, they’ll ask you to stop making any payments. You can then convince them with a partial payment instead of offering nothing.