Having a healthy financial portfolio means that you have no debts to repay and even if you have some, they are well managed. Debt management is a humongous task as even a small slip can run you in big financial troubles. Therefore, you have to be careful at all stages and also ensure that things are under control while you try to get rid of your loans. While being your own debt manager is a good idea, you should not ignore the need for professional health considering the importance of keeping your financial portfolio under tight control. There are some tried and tested measures that you can take to ensure that you never get too uncomfortable with your loans and debts. Let us check out 10 debt management tips that you should follow to improve your financial situation, irrespective of how much you owe.
1. Review your financial situation periodically
Start by taking periodic reviews of your financial health so that you have a fair idea about where you stand. Draw a list of the amounts you owe, with complete details about the creditors, the amounts owed to each of them, the loan due dates and the monthly payments that you are clearing out to them. The list alone can help you see the big picture and also plan the repayment schedule. The list is nor do-and-forget stuff as it needs to be reviewed periodically to understand how well you are managing the debts. Make it a routine to update the every month to be able to get a clear understanding about the ongoing changes in your financial situation.
2. Access your credit score regularly
While preparing a creditor list is one aspect of debt management, keeping a tab on your credit score another key area. Access a copy of your credit score regularly to ensure that it is correct and updated. There are Credit Reference Agencies that hold your credit file and keep the entire information about your loans and debts. These agencies get the information from the lenders who are bound to share it. Falling behind your payments can have a detrimental impact on your credit score, which can impact your ability to get loans in the future. Checking out your credit score on a regular basis helps you to determine your value in the loan market.
3. Manage your monthly payments properly
Another important debt management tip is to pay off and manage your monthly payments on time, every month. Refer to the creditors list at the beginning of the month to know the amounts due to different people during the month. Check out the due dates for each of the payments and set reminders if you need to. Plan your monthly budget in a way that you are able to repay the installments comfortably. Late payments make it tougher to repay the debts as it results in an increase in the debt value by the means of addition of the late payment fine amount. Moreover, do not skip the payment completely if you forget to pay on time. It is a wrong practice to wait till the next date and clear two installments together. You should rather pay the lender as soon as you remember about the due date because not doing so means that the breach can be reported to the credit bureau.
4. Create a priority checklist
Besides maintaining a standard debt list, you should also create one that lists out debts on the basis of payment priorities. For instance, your home mortgage should be on top of your repayment priorities because any hitch can lead to repossession of your property. Form a smart repayment plan that is focused on repaying the debts in the order of priorities so that you are through with them as soon as possible. You can talk to an expert to help you out with an optimal priority-based repayment plan.
5. Make at least the minimum payments against your debts
If you are unable to pay one of more of your debts due to some unfortunate reasons, try and make the minimum payment at least. This may not seem like a great idea as it will not be of much help in the closure of the debt. But it will at least keep it from getting accumulated and also maintain the account in a good standing. Missing payments altogether, on the other hand, will make things worse and eventually result in the account getting into a default state.
6. Maintain an emergency fund to keep you secure
Maintaining an emergency fund is a smart debt management tip that most experts will give. If you do not maintain any savings, things may just get worse and your debts will probably grow with time. An emergency fund, however small, can effectively cover routine expenses so that you may focus on repaying the lenders. Start small and try to pool in some money every month so that you have something to fall back on. Set a target of maintaining as much reserve that would cover your living expenses for at least 6 months or a year.
7. Manage other expenses as well
Even though debt management is essentially concerned with the handling of the amounts that you owe to various lenders, it is a much wider concept. It also encompasses the planning and management of all the monthly expenses so that you have enough surpluses left for debt repayment. Have a smartly-planned monthly expense budget that includes all your essential living expenditure and keeps tight control over wasteful expenses. If you save some money in a certain month, it can be put into the emergency fund, which can later be used to repay your loans faster.
8. Use automated payment methods
Go tech-savvy with your debt repayment by using automated payment methods. There are chances that you may miss on a debt installment unintentionally due to one reason or the other. The best way to avoid this is to automate payments through your bank account so that the installment gets paid automatically without any need to intervene. At the same time, maintain the right account balance to ensure that there is enough to carry out automated transactions smoothly and seamlessly.
9. Negotiate on the interest rates
Negotiation on the interest rates is the best idea to bring down your debt burden every month. Assess the interest rates thoroughly and compare them with market rates every time you take a new debt. Not only this, you can even bargain with the existing creditors and ask them to lower the interest rates if you are finding it difficult to manage your monthly payments. Most creditors would do so rather than lose the entire amount due to default.
10. Do not hesitate to take professional help
DIY debt management can be a massive challenge if you have a complex financial portfolio. The best tip in such circumstances is to avail the help of a professional debt management company. For those in deeper trouble, a debt settlement company such as CuraDebt can come to your rescue. Such providers offer professional guidance related to debt settlement and tax relief in case you are in serious trouble. But make sure that you know the company really well before partnering with them. For instance, you can check out CuraDebt Review (Updated for 2018) to get an idea how it would work.
A smart debtor will always focus on quick and smooth repayment so that he can maintain his credibility and get free from the burden. Following these tips and ideas can be of great help in timely debt repayment and maintenance of a healthy financial situation.