Low income earners: take heed of this advice. Almost everyone has probably found themselves in debt at one point or another. It’s really nothing to be ashamed of, but being in debt and not doing anything about it is pretty dangerous. What you need to know even before we begin is that getting out of debt is really hard, whether you have a high income or a low income.
The reason why you must seriously think of getting out of debt is due to the impact this makes on your future. Debt comes with a number of consequences that are terrible for you. First off, your credit score suffers and takes a nosedive, because your credit report is filled with delinquent loans. In addition to this, you are blacklisted and unable to take on more credit since most creditors consider you a risk.
Being in debt also means that you have to start dealing with debt collectors, which is not only a terrible thing but also demeaning and demoralizing. You will also have trouble in the future if you want to buy a house, buy a car, change jobs, or even rent an apartment. It is therefore extremely important that you learn how to get out of debt. Now, if you are on a low income, it is that much harder, but there are things you can do to still get yourself out of this terrible mess. The following points will help you learn how to get out of debt on a low income.
Use the Snowball Method
This is a popular way of repaying your debts. It is a technique that will practically cause your debts to roll away. What you need to do is create a list of all the loans you have, and start with the one that has the lowest balance, continuing on to the one with the greatest balance.
Each month, ensure to allocate part of your earnings towards clearing the low balances little by little, and for the big balances, concentrate on repaying the minimum premium only. This trick helps you see how much effort you are making by taking care of what you can afford first.
Find a Side Job
You should consider finding another job that will be dedicated entirely to loan repayment. Ensure that any extra money you make goes towards clearing your loans and is not used on any other projects. Securing your financial future is very important.
Consider Refinancing Your High-Interest Loans
When you have a list of all the loans you owe, and how much each loan is charged, you can have a clear picture of just how much you are paying. There are plenty of creditors offering similar loans at a lower rate, and this will help you refinance your loans.
Refinancing simply means consolidating your loans into one. Visit different banks and request they help you with your mountain of debt. What they do is, they take over your credit, and give you one loan that is easy to manage.
Try Making More Than One Payment Per Month
If you are used to repaying your debts at the end of the month, and this seems too much for you, you can try doing it each week. With a good side gig that probably pays you per week or every two weeks, you could allocate these monies to the loan, and send whatever amount you get to the creditors.
You could plan to repay even as little as $50 a week or every 2 weeks. It will certainly make a huge difference in your debt.
You must now learn how to be frugal, and avoid taking on more debt as a result of your excessive spending. You must cut down on how many times you dine out, how often you enjoy a drink after work, and how many times you are at the mall.
Limiting your spending and adopting a more frugal approach towards your needs gives you the option to have a little more money in your hands, which you can allocate towards your loans.
Ask for Help
No matter how proud you are, you must always put yourself first. Being in debt is a terrible situation that is likely to get worse fast. If you have parents that can help you, you could consider going to them for help, or you could ask your boss for a company loan to settle your other debts.
This is a good option, but it’s not always the best. Only resort to this when you have been pushed to a corner and the creditors are threatening you with legal action.
It’s not easy to get out of debt while on a low income, but it can be done. In most cases, creditors are always more than willing to help you out, and when you present them with a repayment plan, they are less likely to sue you for the debt. Always try to be as open as possible with your financial struggles so you can receive some understanding.