Credit Education 101
Website CertifiedPrivacy Protected
Credit Education > Debt Management Help > Managing Debt Effectively

Managing Debt Effectively

By Janet Lacey
Published: Friday, September 4th, 2009

Most of us have borrowed money or taken debt at one or the other time in life. The proper management of debt is very important to avoid any type of unforeseen conditions. It is always better to pay off your debt as soon as possible.

There are few simple yet effective ways which can help you to manage your debts efficiently:

  • Set out a proper monthly budget:
    Make a proper budget every month relating to all your expenses and income. The budget will help you to know where exactly your money is going and in such conditions you can reduce all unnecessary expenses and use that amount in paying your debt. It is very important to be true to yourself and your expenses while drafting your budget. Setting up of an emergency fund is also a great way to get a good help for the repayment of your debt.
  • Pay high interest rated debts first:
    Make a list of all your debts with the ones with highest interest rate on the top and so on. It is not the biggest loan which is costing you more but the one which has the highest rate of interest. So just pay off these loans with huge interest first and then the ones with less interest later on.
  • Do investments to pay off your debt:
    Once all your loans are paid start investing and saving your money so that it ca be used in future if similar situation arises.
  • Have an automatic saving plan:
    Set up an automatic saving plan with your employer or your bank where a particular amount is saved each month from your pay and is deposited in your account. This way you can manage your debts better as there will be savings from where you can pay them.
  • Consolidate your debts:
    If you have many different loans then just consolidate them all in one. A consolidate loan may cost you less as compared to what you were paying individually. This way you manage your debt efficiently and can also repay them faster.
  • Make an extra payment on mortgage:
    There are options with many mortgage lenders where you can make a part payment of your total amount at specific interval of time. This may be like 10% lump sum amount every year. By paying your mortgage in these small lump sum amounts can actually reduce the cost of the overall loan which is spread over the years.
  • Use your cash from life insurance policy:
    If you have a life insurance policy which builds up cash value then you can borrow this value to pay your debts. In such conditions you will be paying interest to your own account and it will be a better way than to pay interest to someone else. Moreover try to repay this life insurance loan as quickly as possible as it will help in increasing the value of your life insurance policy.

So just follow these tips and manage your debt effectively and efficiently so that they do not bother you a lot.

No Comments

No comments yet.

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.