Most people are having a tough time covering all their expenses because of turbulent times. It has shut down the economic system to an extent, and now people are trying to recover. Whether your job wasn’t essential or your employer cut your hours, times are hard. Luckily, things can be done to get out of debt and save money!
1.What Programs You Can Take Advantage Of?
The goal here is to get out of debt, but sometimes, you must be savvy with how you do that. Options available to you include:
- Personal loans
- Home loans (equity)
- Credit Cards
- Reverse mortgage
- Bankruptcy
- Money transfer
This list may not seem like what you’ve heard before, but these options can help you.
Loans are one of the quickest ways to get money into your bank accounts. A personal loan is quite flexible and has short or moderate repayment terms. You can generally request a loan for a specific amount from a lender and have it within a few days. This is an excellent choice when you’re short on cash to pay a bill or buy groceries.
You could get as much money as you need. While lenders want you to be careful, they do offer incentives for taking a little extra. Just remember that you’ve got to pay back the loan by the due date. If that doesn’t happen, your debt is sent to collections, and you must deal with debt collectors.
Home loans are another option, as well as a reverse mortgage. If you own a house, the equity inside can give you the money you need now. Usually, you use that money toward home improvements, but it can be utilized for any reason.
Reverse mortgages are similar, but you don’t pay the principal or interest each month. You must keep the house in good condition and keep up with your home insurance premiums. The amount keeps adding up, and you pay it off when you sell your house or when your loved ones do after your death. There are risks involved with either option, so it’s best to weigh the pros and cons.
Family members might be doing better off than you. Consider asking them for help. This isn’t the best option, but it can be useful if you need money and can’t get a loan. It’s a good idea to have proof of the transaction, and a money transfer is a great choice. Just make sure that you both shop around for the best deal and consider going through your banking institutions to ensure that you’re not scammed.
2.Owe Money to the IRS?
The government offered some minor tax relief when it said that no one had to file taxes until much later than the April cutoff date. However, the time has come and gone to file and pay taxes for last year. If you couldn’t do that, you may now owe the IRS a lot of money. This isn’t very comforting, but there are things you can do.
For one, pay as much as you possibly can right now to avoid high interest and other penalties. Consider calling the IRS directly to ask about payment options. A representative can tell you what’s available so that you can pay as little as possible and make affordable payments.
To do this, you often have to link your checking account with the IRS. That way, they can automatically withdraw funds on the appointed date.
Other debt relief options include requesting an extension, such as a hardship extension, or borrowing money to pay off the full amount. If you own a credit card, consider using that (or multiple cards), but you are charged a processing fee. Those who know they are going to have the money at a specific time can request a short-term extension. However, the full balance must be paid off on the appointed date.
3. Bankruptcy Can Reduce Your Debt
Though the term has a negative connotation, bankruptcy can help you lower your debt and provide relief. Using this as a credit repair option can take time, but it is doable. You’ve got to pay a lawyer to help with the bankruptcy. During this time, you can tell debt collectors and credit card companies that you’re in the process of filing. With that, they can’t continue to ask for money or harass you. This is called an automatic stay and could help stop wage garnishments, foreclosures, evictions, and utility shutoffs.
Generally, bankruptcy only works on dischargeable debts, such as those from credit cards and other bills. You must continue to pay child support and other things. Still, if you have high amounts of debt like that, it could be the best way to get rid of it and start over.
Remember, the bankruptcy shows on your credit report for up to 10 years, lowering your score. That said, most credit card companies and lenders know that you can’t file again for a while. Therefore, they may be more willing to send out new cards or give you a loan.
As part of the bankruptcy proceedings, you’re required to take a credit counselling class. This helps you get the education you need to rebuild credit scores and find new financial habits. Often, financing budgeting is part of this. Learning to create a budget ensures that you live within your means and reduce your risk of getting into debt again later.
4. Consolidate Your Debt with the Right Credit Card
Most people aren’t aware that they can consolidate all of their debts with a credit card. It sounds too good to be true, but it’s possible. They are called balance transfer credit cards, and they allow you to move the amount of money you owe from one card to another.
Almost every credit card allows for balance transfers, but there is often a catch. They have fees attached to them in most cases. However, you can look for no-fee or low-fee balance transfer cards. That way, you could move all of your debt from a high-interest card to your new low-interest credit cards.
If you are re-establishing credit, you always want to choose cards with low interest rates and no annual or monthly fees. That way, the debt you spend from the card is going toward purchases and not extra costs to have the card.
Keep in mind that some high-end reward cards do have annual fees. These are normal because you get so much in return. This could be an option for you, especially if you already use the rewards they provide. Cash-back is the most sought-after reward, but you can get merchandise, free airline miles, and many others.
Those who are trying to consolidate debts without doing a bankruptcy could benefit from balance transfers. If you can’t get a zero percent APR, choose the card with the lowest interest rate and the highest limit. That way, it’s possible to move the higher interest amounts to that one. Ultimately, you want no balance on any other credit card you own. Any with annual/monthly fees should be canceled so that you don’t have to pay them all the time.
Now, you’re focused on a single credit card and can pay more each month to cover the interest and more of the principal. This is where a zero-percent APR comes in handy. Whatever you pay each month goes directly to the principal, helping you pay the card off sooner
5.Staying Debt-Free
Once you get out of your credit card debt, it’s important not to get back into the habit of spending more than you make. The best way to do that is not to use credit cards at all. However, in today’s digital world, it’s nearly impossible to do. Without that credit, you’ve got no score, making it hard to get loans for cars, homes, personal needs, and more.
Therefore, be smart about using credit cards. Make sure that you have low interest rates and pay off the debt you incur each month to avoid a recurring bill. This is the best advice available, but it isn’t easy to do.
If you’re financially hurting right now, credit seems like the easiest way to help. However, paying the debt off later puts you in revolving debt, which is a challenge to get out of, as you’ve probably already seen.
Debt consolidation can take many forms, such as bankruptcy, balance transfers to low-interest cards, and taking out a loan sufficient to cover all other debts. Other than with bankruptcy, you have one monthly bill, hopefully with a lower interest rate than the rest.
Financial budgeting is essential, regardless of the path you choose. That way, you know what bills are coming due, how much you spend, and what’s left for entertainment. Just make sure that you include every expense, even those that are only paid every other month. It’s also important to factor in groceries, gasoline, and other incidentals. This truly helps you see where money goes and if there are corners that can be cut.
You can get and stay debt-free, but only if you work hard for it and know what to do.