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What to Know About Debt Management

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Managing debt can be overwhelming and intimidating. Keeping on top of your debt payments takes time, energy, and consistent effort.

Fortunately, there are many strategies to help manage your debt and get you back on track with your finances. This blog post will discuss three key strategies to help with debt management and debt consolidation.

Plan your Budget

Budgeting is the most effective method of managing your debt. It involves creating a spending plan, which is called a budget. Creating a plan for spending your money in advance lets you know if you have the funds to pay for things.
When you budget, you balance your income against your expenses. When you have enough to pay for your expenses, you can allocate money for other things you want. 
To budget effectively, prioritize your expenses first. This ensures that you are covering your debt obligations. A few other tips for budgeting to help manage debt are:
  • Track your spending
  • Set a spending plan
  • Automate your debt payments
If your debt is hard to manage even with a budget, there are other steps you can take to get it under control.

Negotiate with Creditors

Managing high monthly debt payments can make it challenging to afford the necessities while paying down your debt. However, despite conventional opinions, creditors are often willing to negotiate with their customers. Therefore, if you’re afraid of getting behind on your payments or having to take out additional debt to get by, consider reaching out to your creditors.
Be honest about your situation and ask if they are willing to help you. If you’ve been a reliable borrower in the past, making your minimum monthly payments on time, they could be open to exploring other options.
Some possible solutions include arranging a reduced interest rate, creating a repayment plan, or in some cases, debt forgiveness. Research options that make sense for your type of debt and situation and work with your creditors to make a plan that works for both of you.

Consolidate Debt

Another viable solution to make the debt more manageable is consolidation. This works well if you have multiple debt obligations from different sources.
Loan consolidation is combining several loans into one debt payment through a single lender. You could save money if you have variable interest rates on these loans and get a lower rate through this consolidation. Additionally, your overall payment amount might be lower, which makes it easier to pay your monthly debt payment each month.
Consider using a balance transfer credit card offer to consolidate your debt. These offers typically involve opening a new credit card that has a promotional low-interest rate on debt balances you transfer over. Check the fine print on these offers because there could be additional fees to transfer your balance. You’ll typically need to repay the balance before the promotion period ends to avoid double-digit interest rates.
You could also investigate personal loans. These types of loans can be used for purposes such as loan consolidation. You repay the loan in fixed monthly payments or installments over a set repayment period. Check the loan costs, such as the interest rate and potential fees, to ensure a personal loan makes sense.
Debt management and debt consolidation can be complicated. If you’re unsure about what route to take, speak with a financial professional for guidance.

Power Financial Credit Union is Here

Managing debt can be a challenging and overwhelming process. Fortunately, there are strategies to help manage debt and consolidate debt payments. With the right strategies and approach, you can take control of your debt and get back on track with your finances. Contact Power Financial Credit Union to talk to our experts about a customized loan solution to fit your needs.