Tips to Overcome Debt Struggles
Using loans and credit cards as financial tools is a good thing. They can help you with monthly cash flow, maneuver around fiscal challenges like medical bills or unexpected expenses, and achieve milestones like purchasing a home. However, sometimes, debt can become troublesome, especially with high-rate credit cards.
Managing too much debt can often feel like you’re trying to climb out of a hole – making little or no progress. Rest assured, with the right help and guidance, overcoming debt challenges is possible, and people often emerge even stronger – mentally and financially.
If you’re ready to free yourself from debt, these tips can help you bounce back and get on the path to financial freedom.
Tip #1: Get Serious About Debt Management
When facing debt, the first step is to confront it head-on. Start by looking carefully at your budget. Identify exactly where your money is going and pinpoint problem areas where you can cut back or reallocate funds to prioritize your debt repayment. This process not only helps you understand your financial habits but also empowers you to make intentional decisions in the future.
Next, gather all the information about your current loans and credit cards. Include statements, interest rates, balances, and payment schedules. Use this information to create a comprehensive overview to serve as the foundation for your debt management strategy.
Here are some tactics you may consider incorporating into your overall debt management strategy:
- Give your credit cards a break until you can get back on track. It can be challenging if you rely on them to make ends meet. Focus on creating a more realistic budget and intentionally cutting unnecessary expenses.
- Hold off on making any large purchases for the time being. Wait until your finances rebound and you’re on better financial footing.
Tip #2: Seek Help to Explore Your Options
Feel free to contact your lenders and financial institutions for options. Contrary to popular belief, most financial institutions are willing and able to help borrowers facing economic hardships. The trick is that you must be proactive and ask for assistance – waiting until after a loan or payment due date can restrict the options available.
Here are some solutions that may be available from your lender or financial institution:
- Restructure Your Loan: Loan restructuring involves modifying the terms of an existing loan agreement to make it more manageable for you. Modifications include extending the repayment period or reducing the interest rate, leaving you with a lower monthly payment.
- Debt Consolidation Loan: This personal loan allows you to combine multiple debts, including loans and credit cards, into a single loan. It makes managing your finances much easier as you have only one monthly payment, typically at a much lower interest rate. As a result, you immediately save money and can reduce your reliance on credit cards.
- Credit Card Balance Transfer: With a balance transfer, you move the balances from one or more of your current credit cards to a new card, ideally at a much lower interest rate. This option lets you streamline your credit card obligations into one solution and instantly reduces your monthly interest charges.
- Home Equity Loan or Line of Credit: Both options allow homeowners to borrow against the equity in their property. With a Home Equity Loan, borrowers receive a lump sum upfront, while a Home Equity Line of Credit (HELOC) provides a revolving credit line that can be accessed as needed. Both tend to have lower interest rates than other forms of borrowing, as the home's value secures them.
- Ask for a Credit Card Limit Increase: If your request is approved, this will raise your available credit limit while lowering your unsecured debt ratio and improving your overall credit. Only consider this step if you’re making steady progress toward eliminating debt and can avoid the temptation of spending more.
- Skip-a-Pay: Many lenders and financial institutions offer the option to skip one monthly payment on eligible credit cards and/or loans - as long as the account is in good standing. Taking a break from your payments for one month can allow you to funnel that extra money elsewhere to help you get back on track.
Tip #3: Consult with a Financial Advisor
One of the first places people look when facing debt challenges and ever-growing balances is their retirement accounts. Eyeing your tax-advantaged accounts as a solution is a mistake. Retirement planning requires time – allowing your money to compound and grow. Taking from that pool can set you back substantially on your retirement plans and result in a hefty tax bill.
Instead, reach out to a financial advisor. They can provide insight into how you can overcome this challenge. Often, there are investments outside of tax accounts you can utilize that will have a manageable impact on your long-term retirement plan.
Tip #4: Prioritize Your Credit Score
If you’ve been struggling with debt, your credit score has likely taken a hit. But keep hope! Stay focused on the bigger picture. The best step to decrease your debt is to secure the lowest interest rates possible – especially when applying for a debt consolidation loan. Improving your credit score will help you qualify for lower rates and reduce your debt burden.
Start by obtaining a copy of your credit report and review it for any errors or discrepancies. You are entitled to a free copy of your credit report from www.AnnualCreditReport.com. If you spot any inaccuracies, report them to the credit bureaus immediately. Then, focus on implementing strategies to boost your credit, like making timely payments and reducing credit card balances.
Tip #5: Stay Focused and Optimistic
It’s essential to remain focused on your financial journey and maintain a positive mindset throughout debt management. Keep your eyes on the prize, and don't get discouraged. Celebrate small victories to keep yourself motivated, whether paying off a good chunk of your balance or sticking to your budget for the whole month.
Embrace the journey to financial freedom and remember that the goal is progress, not perfection. Each step forward brings you closer to your goals.
We Can Help!
If you’re struggling financially, know that you are not alone. The challenges may seem daunting, but you can embrace the opportunity for growth and empowerment. By implementing proactive debt management strategies, you can regain control of your finances and pave the way to financial freedom and stability.
If you're ready to eliminate high-interest debt and simplify your financial life, we can help. To learn more about Balance Transfer or Debt Consolidation options, please stop by any of our convenient Service Center locations, call 800-367-6440, or make an appointment online to speak with a representative today.
Other Resources
How Debt Consolidation Loans Work and the Benefits
What is your Debt-to-Income Ratio?
Personal Debt Consolidation Calculator
By Campus USA at 15 Dec 2023, 08:00 AM