Ways To Tackle Debt When You Are Cash-Strapped

Emergencies do not intimate beforehand, and sometimes the telltale signs are overlooked. As a result, your emergency cushion becomes short of cash. Although financial experts enjoin the building of a safety net with at least six months’ worth of living expenses, people end up with exiguous savings and become befuddled when caught unawares by unforeseen expenses. The availability of online loans, however, is partly to blame for a lack of a nest egg.

Small emergency loans do not even require credit checks and are approbated based on the income and expense details you provide in your application form. There is a strong probability of borrowing more than your affordability, which eventuates in rolling over a loan that causes debt accumulation. Consequently, you find yourself in an abyss of debt.

Finances become complex the second you realise that you have taken on way too much debt. Almost all small emergency loans are required to be discharged in fell one swoop. Even if the amount mushrooms, lenders expect you to settle the debt in full sooner rather than later. Otherwise, interest rates keep accruing by the day.

Ways to deal with debt when you are skint

It can be indubitably challenging to tackle debt when you are breaking. Fortunately, there are some ways to settle all your outstanding dues.

• Identify the sources of income

Having identified that your current employment is not sufficient to discharge your debt, you should explore new income sources. The more money comes in; the sooner you will honour your debt. The cost of debt quickly mushrooms because of high interest rates and late payment fees. Here is how you can improve your income sources:

• Take a second job. It could be a part-time job or a contract job. It does not matter whether it is in your specialised field or another field, as long as you have the skills. You could grab a side gig, too, such as babysitting, lawn making, dog walking, or pet sitting.
• If you have a flair for writing, you can provide your clients with writing services. Various freelance platforms such as Fiverr and Upwork provide innumerable writing projects. You can also grab designing and web development projects if you have the knowledge. They are more propitious than writing, where a stipend is provided based on the word count.
• You can rent out a spare room. Nowadays, many people rent a garage and lawn to allow other people to park their vehicles in exchange for some money. It is a great way to make profits.

Once you have additional money coming in, you can use that to meet your debt obligations. Make sure that you do not spend this money on discretionary expenses.

• Create a budget

First off, you need to create a budget to ensure that you have enough money to repay the debt. Chances are you are to prioritise the debt or choose a minimum repayment plan because you are in a tight spot. A golden rule of thumb says that your budget must be in agreement with your repayment strategy.

• There are various types of budgets. The one you choose depends on your financial goals. It is recommended that you record each expense so you know how much and where you have spent. Use a budgeting app if you do not like to maintain a manual spreadsheet.
• Cut back on your discretionary expenses so you manage to retain more money. It will help you settle your debt faster. For instance, you would be able to pay more than a minimum repayment.
• Having whittled down your discretionary expenses, you should consider trimming down your essential expenses, for instance, whether it is possible to downsize your house.

A budget is not meant to record all expenses. It is aimed at helping you find ways to clear the debt. You will have to take some audacious and ruthless measures, such as downsizing your house to discharge the debt.

• Come up with an effective payment strategy

Talk to your lenders to know what payment plans you could use to settle your debt. When the whole debt cannot be discharged once and for all, they will likely put you on a minimum payment plan. The size of the monthly instalment will be decided based on your income. It is always recommended that you pay more than the minimum payment plan. Here are the strategies you could consider to clear your outstanding dues:

• You should consider a debt consolidation loan. It combines all your outstanding debts into one large personal loan to be paid down over a period of time. You cannot consolidate your credit card balances. Apply for balance transfer cards for credit card debt. You must have a good credit rating to qualify for a consolidation loan.
• Use a debt snowball method. It enables you to pay off the smallest debt first. This strategy works well in order to gain momentum when you are unmoored by an inordinate amount of debt.
• You might also use a debt avalanche method. It allows you to make the minimum payment towards all debts while allocating the remaining funds to high-interest debts. This strategy works for those who want to settle their high, expensive debts first to save money in the long run.
• If nothing works, you should consider a debt management plan. A new revised payment plan will be proposed after taking your financial circumstances into account. However, you will be responsible for making the payment to the debt management company, not your lenders.

It is always suggested that you carefully consider your financial condition while choosing the repayment plan.

• Spend cautiously

The purpose of budgeting cannot be solved unless you reduce your expenses. Even if your income is greater than your expenses, you should try to cut down on your expenses so you can start clearing the debts sooner or faster. Here is how you can keep a tight rein on your expenses:

• First off, you should cut back on discretionary expenses. Unless you have settled all dues, make sure that you do not spend money on dining out and nights out.
• Focus on energy and gas bills, too. Add additional layers to reduce heating bills. Avoid using your car for short errands. Walk on foot or use a bicycle. It will help save money on fuel charges.
• Buy groceries as per your consumption. Do not overstock items that are perishable. Stockpiling of non-perishable items like detergents and toilet paper is recommended only when it saves money, but at this time, you should employ your money towards debt settlement rather than block it in such items.
• While reducing your spending and paying off your debt, you are still obligated to save money for a rainy day. An emergency cushion will preclude you from borrowing money to meet unexpected expenses.

The bottom line

It can be difficult to get out of debt if this is way too much. In order to clear all debt obligations, you must create a budget, improve your income sources, spend cautiously, and come up with effective payment strategies.

It can be challenging and take some time to clear your dues, so make sure you have a positive attitude. It is easy to be frustrated, but this will make things even worse.